How Singapore became an international financial center

 How Singapore became an international financial center

From a poor country in the "third world", Singapore took 30 years to become a leading financial center and keep the momentum to this day.

"Hey Mr. Van Oenen, we want Singapore to become the financial center of Southeast Asia in 10 years," Dr. Albert Winsemius, Economic Advisor to the Government of Singapore, said when he called his friend who is a deputy director of a branch of an American bank in Singapore.

But Van Oenen, who is now in the UK, replied: "Okay, you go to London. You can develop it in five years". It was 1968.

When he arrived in London, Dr. Winsemius was brought before a large globe by Van Oenen in the boardroom.

Pointing at it, Van Oenen slowly explained. The world of finance begins in Zurich. Zurich banks open at 9 a.m., then Frankfurt, then London. In the afternoon Zurich closes, then Frankfurt, then London again. Meanwhile New York is open. Therefore, London transfers financial transactions to New York. In the afternoon, New York closed and they moved their business to San Francisco. But when San Francisco closed, the world went dark.

"Nothing happens until 9 am the next morning (Swiss time), which is when the Swiss banks open. If you put Singapore in the middle, before San Francisco closes, Singapore will take control. ", suggested Mr. Van Oenen.

Dr. Albert Winsemius (with glasses on the left) and Mr. Lee Kuan Yew in China in 1980. Photo: Business Times

Dr. Albert Winsemius (with glasses on the left) and Mr. Lee Kuan Yew in China in 1980. Photo: Business Times

This conversation is also recounted in Mr. Lee Kuan Yew's memoirs. When Dr. Albert Winsemius shared this idea, he was the current Prime Minister of Singapore and realized what he had to do.

"Unlike Hong Kong, Singapore cannot rely on the city of London's reputation as a financial center with a long banking history, nor can it rely on the help of the Bank of England, which is typical of its wealth and history." experience, reliability and financial credibility. In 1968, Singapore was a Third World country", Mr. Lee Kuan Yew wrote in his memoirs.

Building 'soft infrastructure'

It is worth noting that the Singapore government from the beginning has viewed the financial services industry as not simply a means of supporting the development of other industries, but as a pillar of growth. To do this, Mr. Lee Kuan Yew uses a "developmental state" approach. Accordingly, the state identifies key industries that can contribute to GDP and issues appropriate policies to support it.

Right in 1968, Singapore decided to establish the Asian Dollar Market (ADM). Together with the parallel Asian Currency Unit (ACU), ADM has enabled foreign banks and financial institutions to enter Singapore's financial services sector. In order for ADM and ACU to develop, Mr. Dieu introduced tax incentives and incentives.

Initially, ADM was mainly an interbank market in Singapore, capable of holding foreign currency funds of foreign banks and then lending to banks in the region and vice versa. It then buys and sells foreign exchange and foreign currency financial derivatives called debentures, takes care of lending, issuing bonds, and managing capital. ADM grew to exceed $500 billion, approximately three times the size of the domestic banking market in 1997.

As Singapore's financial services industry grows increasingly complex and internationalized with the proliferation of domestic and foreign financial institutions, the need for a more integrated approach to industry regulation and regulation becomes more important. should be urgent. Thus, the Monetary Authority of Singapore was born in 1971. This agency plays two roles as central bank and financial regulator.

The Singapore Stock Exchange (SES) was subsequently established in 1973. The SES was further consolidated with the Singapore International Monetary Exchange to form the Singapore Exchange (SGX), to accommodate diversity. growth of the Singapore capital market.

The formation of the MAS and SGX was an institutional response to the rapid growth in Singapore's financial services sector during this period. Along with that, the island nation created a number of other financial-related institutions, leading the country through a period of further internationalization and diversification during the 1980s and 1990s.

Another obvious factor in Singapore's rise has been Mr. Lee's ability to take advantage of global financial fluctuations. This started in 1971 when the US decoupled the dollar from gold. He quickly seized the opportunity and further promoted Singapore as a regional foreign exchange hub, drawing on the background from ADM and ACU.