International Development Association (Amendment) Bill

Order for Second Reading read.

3.03 pm

The Senior Minister of State for Finance (Mr Chee Hong Tat) (on behalf of the Deputy Prime Minister and Minister for Finance): Mr Speaker, on behalf of the Deputy Prime Minister and the Minister for Finance, I beg to move, "That the Bill be now read a Second time."

The Bill seeks to amend section 4 of the International Development Association, or IDA Act.

IDA is part of the World Bank Group. It provides concessional loans to its least developed member countries. As a member of IDA, Singapore has contributed to IDA's replenishments since 2002.

Currently, section 4 of the IDA Act allows the Government to pay for subscriptions to IDA, up to a cumulative "total subscription" cap of US$1 million. It also allows the Government to seek Parliament's approval to increase the cap, as the Government did in 2016 and 2019. The current cap is US$1.3 million, equivalent to about S$1.85 million.

The amendments to section 4 will require the Government to seek Parliament's approval for every additional subscription to IDA, instead of approving the cap for the cumulative amount of contributions. Parliament will, therefore, remain as the approving authority over any such expenditure.

Mr Speaker, we are introducing these changes because IDA revised its voting rights framework in October 2021.

Under the previous voting rights framework, only a small part of the contributions made by a country would result in "subscription votes". However, under the new voting rights framework, all new contributions to IDA replenishments will equate to subscriptions.

Sir, for avoidance of doubt, it does not mean that our votes will go up sharply relative to other members. This change in method affects all IDA members.

With this change by IDA, we can no longer meaningfully compare past and future votes, as the unit of measurement is no longer the same. We are proposing to amend the Act to reflect these changes.

Singapore will continue to contribute our fair share to IDA as a responsible global stakeholder, while ensuring financial prudence and spending within our means. If Parliament approves this Bill, we plan to separately seek Parliament's approval for our next subscription to IDA in 2023. Mr Speaker, Sir, I beg to move.

Question proposed.

3.06 pm

Prof Hoon Hian Teck (Nominated Member): Mr Speaker, Sir, this Bill seeks to make an amendment that would exclude any payment made to the International Development Association (IDA) that is not in the nature of a subscription. Furthermore, a new subsection is added to make provision for the maximum amount of any additional subscription to be specified and to be authorised by a separate resolution of Parliament.

As has been pointed out in this House by Second Minister for Finance, Ms Indranee Rajah, in November 2019, since Singapore joined the International Bank for Reconstruction and Development, a major institution of the World Bank Group that makes loans to developing countries, in 1966, it has received 12 loans to support various infrastructure projects. The last loan was signed in 1975. This means that for a decade after Singapore became fully independent, our country benefited from external loans that supported our journey on the path of economic development.

Economists have grappled with the question of what it takes to make a poor country become rich. They do not have a fully satisfactory answer. While alleviating the problem of poverty in developing countries is such an important task, the approach to achieving it is still not so well understood. While we know the proximate causes of economic growth in the sense that a higher standard of living can be explained by a higher level of applied technology and a higher level of human capital and physical capital per worker, less is known about the fundamental causes of economic growth.

What are the underlying reasons why some countries are unable or unwilling to invest in capital and technology? Despite our limited knowledge, we do have many examples of countries that have experienced growth take-offs that raise the quality of life of their citizens.

Our own experience – the Singapore experience – suggests that when political and economic institutions are set up that support an integration with the global economy to facilitate the transfer of technology, we achieve a growth take-off. Along the growth path, the extension of external loans to finance infrastructural projects enables the country to overcome capital market constraints, especially when the investment is lumpy. Singapore's subscription to IDA as a donor country allows us to contribute to a global fund that can potentially enable other countries to get onto a path of economic development, just as Singapore did.

There is a wide gap in the standard of living between poor and rich countries. Some economists have argued that geography plays a big part in explaining why some countries remain poor despite the availability of frontier technology that can be tapped for growth. Unfavourable soil conditions may make it hard to develop agriculture, for example, and many countries tend to have to develop their agriculture first before manufacturing can become an increasing share of the GDP. For such countries, a lack of navigable rivers and poor access to sea transport may make it difficult for them to effectively make use of their factors of production.

Communities might also be disadvantaged economically when climatic conditions lead to widespread diseases, such as malaria and dengue fever, that affect a large proportion of the labour force. For them, therefore, concessional loans can be made available, through IDA, to finance large-scale investments in transport infrastructure and disease eradication to partially overcome these geographical disadvantages.

I think that Singapore can make a meaningful contribution to this global effort. Mr Speaker, Sir, I support this Bill.

Mr Speaker: Senior Minister of State Chee Hong Tat.

3.11 pm

Mr Chee Hong Tat: Mr Speaker, I thank Prof Hoon Hian Teck for supporting the Bill.

Sir, Singapore has been contributing to IDA for the past 20 years in support of the World Bank's efforts to improve the lives of people in the poorest countries. As Prof Hoon shared in his speech, when Singapore was a Third World country in the early years of our Independence, we had benefited from loans provided by the World Bank to finance our nation-building and key infrastructure, such as our port. Today, we have the world's largest container transhipment hub-port.

There is a Chinese saying 饮水思源 – when we drink water, we must remember where it came from. And when we are able to do so, we shall pay it forward to help others.

As a responsible member of the international community, Singapore will continue to do our part to support the World Bank in assisting disadvantaged economies finance their long-term development needs, including initiatives to mitigate the effects of climate change, and to build stronger resilience against future pandemics and natural disasters.

Within our region, IDA will also help some of our neighbours like Laos and Cambodia.

As Prof Hoon Hian Teck said, a stable and economically vibrant ASEAN will benefit all countries in the region, including Singapore. Mr Speaker, I beg to move.

Question proposed.

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. – [Mr Chee Hong Tat].

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