Grant to IMF's Catastrophe Containment and Relief Trust

6.13 pm

The Minister for Transport (Mr Ong Ye Kung): Mr Deputy Speaker, on behalf of Senior Minister and Minister in Charge of the Monetary Authority of Singapore, I beg to move,

"That this Parliament, in accordance with section 6A(2)(d) of the Bretton Woods Agreements Act (Chapter 27 of the 2012 Revised Edition), resolves that the maximum amount of grants that the Monetary Authority of Singapore may give under a bilateral agreement (or its subsequent variations) to be made by the Monetary Authority of Singapore (on behalf of the Government of the Republic of Singapore) with the International Monetary Fund to support the Catastrophe Containment and Relief Trust is 17,600,000 United States Dollars (approximately 12,300,000 Special Drawing Rights)."

I will be moving a second Motion for a separate grant to the IMF's COVID-19 Crisis Capacity Development Initiative, or CCCDI; and a third Motion for a separate grant to the IMF's Trust for Special Poverty Reduction and Growth Operations for the Heavily Indebted Poor Countries (PRG-HIPC Trust).

Singapore will be providing these three grants as part of multilateral efforts to enhance the capacity of the IMF to assist vulnerable low-income countries, in response to the COVID-19 pandemic.

Sir, with your permission, I would like to propose that the substantive debate on all the three Motions takes place now, to allow the substantive arguments to be captured cogently in a single debate. Subsequently, we will still move and take the second and third Motions separately in compliance with Parliamentary procedural requirements.

Mr Deputy Speaker: Yes, I give my consent to one debate, and then, three votes.

Mr Ong Ye Kung: Thank you, Mr Deputy Speaker.

As part of its mandate to ensure the stability of the international monetary system, the IMF provides financial assistance to countries experiencing balance of payments difficulties. To carry out its functions, the IMF relies on resources provided by member countries. Singapore has been contributing to these efforts.

Arising from the COVID-19 pandemic, the IMF has seen a surge in requests for financial assistance, especially from low-income countries. IMF has, therefore, called on its members to help bolster its financial resources to assist the most vulnerable members in recovering from the severe impact of the COVID-19 pandemic.

The amendments to the Bretton Woods Agreements Act, approved by Parliament on 11 July 2016, enables MAS to make grants to the IMF as part of international efforts to assist low-income countries. This is subject to three conditions, as specified under the Act. First, such financial assistance is part of a collective action amongst IMF member countries; second, MAS publicly discloses key information about the financial assistance; and third, Parliament fixes, by resolution, the maximum amount of the grants.

I will now explain the context and considerations for the three grants.

First, Singapore's grant to the Catastrophe Containment and Relief Trust, or CCRT.

The CCRT was established in 2015 to provide debt relief to the IMF's poorest and most vulnerable members in the event of a natural catastrophe or global health pandemic. The relief on debt service will free up scarce financial resources to continue strengthening the eligible countries' medical care capacities and address the social and economic fallout from the pandemic.

The CCRT is in urgent need of replenishment. Its pre-COVID balance was US$200 million. Since the onset of the pandemic, the IMF has disbursed over US$500 million in debt relief to CCRT-eligible members. So, the pre-COVID balance has been completely depleted. The disbursements were made possible through the additional contributions by other member countries, which has amounted to US$800 million so far.

The IMF has requested for Singapore to contribute US$17.6 million, or SDR 12.3 million, to the CCRT. This represents about 1.2% of the total amount of US$1.4 billion or SDR 1 billion, needed to replenish the CCRT. Singapore's contribution is based on our quota share at the IMF and similar to how other countries' contributions are determined.

Second, the COVID-19 Crisis Capacity Development Initiative, or CCCDI. Singapore's grant to the newly launched CCCDI will help to meet the urgent capacity development needs of countries affected by the COVID-19 pandemic.

The objective of the CCCDI is to help these countries develop effective policies to mitigate the economic impact of the pandemic and support economic recovery. This comes in the form of technical advice, practical tools and policy-oriented training to build skills to manage the crisis.

IMF has reached out to member countries, including Singapore, to seek funding support for the CCCDI, and suggested that Singapore make a contribution of between US$2 million to US$4 million. MAS proposes that Singapore contribute a one-off grant amount of US$2 million, or SDR 1.4 million, to the CCCDI. It represents 2% of the total amount of US$100 million needed to support the CCCDI.

Third, contribution to the trust for Special Poverty Reduction and Growth Operations for the Heavily Indebted Poor Countries for Somalia's debt relief, or PRG-HIPC Trust.

The Trust will provide support for the debt relief of Somalia, which is in urgent need of assistance. The majority of IMF member countries, including the ASEAN-4 countries, namely, Indonesia, Malaysia, Philippines and Thailand, have already committed to contributing to Somalia's debt relief package.

The IMF has requested Singapore to contribute US$0.97 million (or SDR 0.68 million). Singapore already holds funds in the other IMF accounts to cover overdue payments incurred by members which are unable to pay and the contribution will be drawn from these accounts. Singapore's contribution would form approximately 0.3% of the IMF's financing package of US$344 million (or SDR 242 million) for Somalia's debt relief.

Why are we making these contributions to the causes of the IMF? In short, we live in an interdependent world and Singapore needs to do its part.

Particularly, the COVID-19 pandemic has underscored the need for decisive and urgent collective actions to manage global crises. As a highly open economy, Singapore has a strong stake in ensuring that the world contain the pandemic, restore people-to-people connections across the world and support global economic recovery. By contributing to the three funds I have mentioned above, we can play our part as a stakeholder of the international community.

The grants to the CCRT and the CCCDI will reduce the size of Singapore's Official Foreign Reserves by a total of US$19.6 million (or SDR 13.7 million). As explained earlier, the grant to the PRG-HIPC Trust will not affect the size of Singapore's Official Foreign Reserves. The proposed grant amounts are also reasonable and commensurate with Singapore's position and role in the global economy.

Mr Deputy Speaker, Sir, MAS has issued a press release on 31 March 2021 to inform the public of the grants and that it would seek Parliament's approval. Following Parliament's resolution to fix the maximum amount of grants that MAS can allocate to the IMF's CCRT, CCCDI and PRG-HIPC Trust, MAS will publish in the Gazette key information about the grants. Mr Deputy Speaker, I beg to move.

Question proposed.

Mr Deputy Speaker: Assoc Prof Jamus Lim.

6.23 pm

Assoc Prof Jamus Jerome Lim (Sengkang): Mr Deputy Speaker, the three Motions to contribute to the International Monetary Fund (IMF)'s Catastrophe Containment and Relief Trust, Crisis Capacity Development and Trust for Special Poverty Reduction and Growth for HIPC initiatives are an important step towards contributing to the commons as responsible citizens in our global village. But I will go further: as a country that has historically hung its hat and been a major beneficiary from globalisation, I would argue that doing so goes beyond responsibility, and is instead a duty and an obligation on our part. If anything, we are not doing enough and I wish to explain why we should do more.

I should, of course, state at the outset that I have previously worked for seven years in the trenches as an economist in a Bretton Woods Institution and I maintain a small balance in my self-funded group retirement account and the staff account at the credit union. However, I do not receive nor maintain any direct financial interests in the Bank nor the Fund.

As Members of this House are undoubtedly aware, despite our globalised footprint, Singapore has no formal foreign or development aid agency, and we do not, as a rule, channel any share of our Budget towards official development assistance. Nor do we have any concerted strategy for increasing our representation at international organisations, such as the United Nations (UN).

For instance, we send a total of 64 staff to the UN system, 0.1% of the total or 0.001% of our population. Compare this to the 506 staff sent by Sweden, a country about twice our size, or the 559 sent by Denmark with a population comparable to ours.

Most of our citizens are narrowly affiliated with just two institutions – the IMF and the World Bank. Apocryphally, this position was motivated by our founding father, former Prime Minister Lee Kuan Yew, who was reluctant to risk the brain drain that could result when our talents went abroad to work at these international institutions.

Our legacy of ambivalence extends to our pocketbook. Remarkably, the official reason for our unwillingness to extend official aid is because, and I quote, "Singapore is a developing country and does not provide official development assistance. We undertake South-South capacity building programmes with other developing countries." The multiple rounds of assistance offered under the aegis of the Singapore Cooperation Programme has, undeniably, been welcomed by other nations in need, but it is befuddling that we would remain unwilling to extend financial resources to other countries, beyond merely technical assistance.

To be fair, Singapore has also largely eschewed the receipt of foreign aid. But even so, historical development assistance inflows have come to a non-trivial amount. Statistics provided by the Development Assistance Committee of the OECD reports that between 1960 and 2004, Singapore received a total of US$14.4 million every year on average. This amount, while uncorrected for inflation, nevertheless represents a net receipt of funds from the international community over the course of our modern history.

What is more, Singapore may yet be set to receive an additional US$5.33 billion, or S$7.17 billion, worth in new SDR allocations, were a new proposal by IMF Managing Director Kristalina Georgieva be accepted by the IMF Executive Board. This amount actually far exceeds the comparatively small amounts that we are formally extending to the Fund today.

To be fair, foreign aid has a mixed record and there is no clear evidence that foreign aid can reliably raise economic growth. Often, the reason is because of politics: donor countries tie aid to specific requirements, which may not be the most beneficial use for the recipient country. Or the governments which receive such foreign aid become more responsive to their foreign benefactors, as opposed to their own people.

But by the same token, aid can be effective when it is conditional, albeit not by making it contingent on certain uses specified by the donor, but by extending support to countries that we observe exercise good policy. Aid can also be channelled to responsible multilateral organisations with a good track record of ensuring that the funds they receive are properly utilised.

And if we are still reticent to provide aid because it would be managed by external parties, we can always direct the funds towards the formation of an international volunteer corps tasked to provide social and economic development assistance to other countries, especially those in ASEAN.

So, the key, as in all good investments, is to carefully direct our foreign aid dollars towards initiatives that take into account returns but adjusted for risk. Indeed, countries, such as Luxembourg and the United Kingdom, demonstrate that it is possible to be simultaneously generous, as well as principled, in one's foreign aid practices.

Let me be absolutely clear: charity begins at home. We must take care of our own needs first and we should prioritise these needs. In crisis times, this is even more pertinent, as many Singaporeans are facing hard times and it is difficult to convince them that we should be looking out for the well-being of those in other nations. And indeed, this impression is not unique. When citizens from countries around the world are asked how much they think their country contributes, they systematically over-estimate this amount, compared to actual disbursements.

So, we are certainly not unique in wanting to look out for ourselves first, and all the more during crisis times. But generosity has its own reward and I believe that we are more than capable of doing both. We should not think that just because we are in crisis mode, we neglect planning for the future. And that future must, surely, entail thinking about the performance of economies besides our own.

Because even from a purely self-interested perspective, uplifting our neighbouring economies can pay dividends in the long run. After all, what we export shows up as another country's imports. When the economies in our region grow richer and faster, they will increase the demand for all goods, including exports from us. And when their incomes are elevated, their consumers are better able to afford our goods and services, which skew towards those of higher value.

Generosity can also increase our soft power, our ability to influence the global agenda in ways that go well beyond our small size. Smaller nations understand this dynamic. The Netherlands, Switzerland, Qatar and the UAE know that they are able to punch above their weight because they have invested in multilateral organisations and in the international system. And if we establish a formal international volunteer corps, the experience gained by our returning volunteers will also contribute toward our goal of promoting greater sensitivity toward regional integration efforts.

Given how citizens' perceptions are that donor governments give more than they actually do, it seems like a short logical step to infer that what they generally want is less, not more foreign aid. But this inference would be misleading.

Somewhat surprisingly, the same study I referenced earlier also asked respondents how much aid they would like to see their countries giving. And these desired amounts actually fall short of how much donor-country citizens think is given and far short of how much they actually give.

The reason, I think, is because we are fundamentally social creatures, and some degree of reciprocity and altruism is baked into our moral fibre. We are often willing to help those less well-off than we are, so long as we can afford it and so long as we are assured that the money is well-spent. But if we accept this premise, then I would submit that a more concerted effort to increase our official development assistance is essentially a problem to be resolved, rather than an insurmountable obstacle.

Given the thrust of these overall remarks, then it should be no surprise, Mr Deputy Speaker, that I am wholly in favour of all three Motions.

Mr Deputy Speaker: Mr Liang Eng Hwa.

6.32 pm

Mr Liang Eng Hwa (Bukit Panjang): Mr Deputy Speaker, in a crisis of this magnitude and scale, every country should play our part to combat this global pandemic. COVID-19 respect no borders or jurisdictions and all countries, big or small, strong or vulnerable, do get impacted in one way or another and we are in this together. In particular, countries in a better position should do our part to help those that face difficulties during the crisis, including the economic fall-out from the pandemic. In the thick of the pandemic last year, Singapore stepped up to contribute diagnostic test kits, PCR machines, protective gears, thermal scanners to neighbouring countries.

Singapore is also an early supporter of the COVAX facility with a US$5 million contribution to help ensure equitable access of vaccines for all countries.

Mr Deputy Speaker, besides the fight on the healthcare front, it is also in our interest to support the global economy recovery efforts and to do our humble bid to improve the well-being of the global community, especially in the developing countries. I support the three Motions to approve US$20.57 million to support the three specific initiatives alongside other member countries' contribution in response to the request by the International Monetary Fund (IMF).

This is all part of the collective global action to help the most vulnerable countries during this major humanitarian crisis. The IMF is the most suitable international agency to carry out these efforts given its multilateral platforms as well as expertise, organisation and their suite of programmes available.

The IMF has always been among the key financing agencies to ensure stability of the international monetary system such as assisting countries with the balance of payments difficulty.

As an international financial centre and a global trade node, Singapore's interest is best served when there are financial stabilities, stronger monetary cooperation amongst countries and sustainable economic growth.

I can imagine that as a result of the pandemic. IMF would have been inundated with more requests for assistance, especially from the low-income countries.

Not withstanding my support, can I ask the Minister a couple of questions? Firstly, what are the considerations in deciding whether Singapore should contribute to this requested round of funding by the IMF? Secondly, do we have visibility as to how IMF will utilise this funding?

Sir, Singapore is a highly open economy and we have a strong stake in ensuring that the world contains the pandemic, restore people's connectivity and movements, and support global economic recovery. By contributing to these three funds, we will play our part as responsible stakeholders of these international communities. So with that, I support the three Motions.

Mr Deputy Speaker: Ms Mariam Jaafar.

6.36 pm

Ms Mariam Jaafar (Sembawang): Mr Deputy Speaker, the COVID-19 pandemic and the ensuing global economic slowdown has made clear just how connected we are and that no one can overcome this disease or its impact alone. Just has been the case domestically, COVID-19 is disproportionately affecting the most vulnerable countries internationally. The impact on health, education, food security, and livelihoods is staggering. And these are cascading outcomes. Millions of children are at risk as routine vaccination programmes have had to be deprioritized and more children are also dropping out of school, especially girls. Decades of progress reversed.

So, protecting the vulnerable is needed to fight this global pandemic, fuel global economic recovery and growth, and to maintain social stability and peace. The successful and inclusive response now can set us all up for a better future. So, there is, as my colleagues have said, a clear, moral and economic imperative for private, public and social sectors to work together.

Yet, we have seen the continued rise of nationalism and protectionism, and multilateralism continues to weaken. Declining levels of official development assistance and rising levels of debt are also impeding the world's ability to pay for efforts to realise global sustainable development goals. The poorest countries hardest hit by COVID-19 will also face a debt crisis.

Singapore is acutely aware of the connectedness and the importance of multilateral efforts. Multilateral cooperation and multilateral institutions like the IMF remain the best way to tackle global challenges, whether it is COVID-19, future pandemics, economic slowdown or climate change. So, their success is vital to us.

We have also seen what remarkable things can be achieved when the world does come together. For example, in what Prime Minister Lee termed "Vaccine Multilateralism", leading to COVID-19 vaccines being developed in record time. So it is important to rebuild and recommit to multilateralism. Sir, I support MAS' intent to respond to IMF's call to support the most vulnerable low-income countries impacted by COVID-19.

I am also heartened by two aspects of the proposed support. Firstly, that the grants will go towards not only immediate relief to fight COVID-19, but investments in healthcare systems and crisis capability development that will strengthen preparedness for future epidemics and crises. Secondly, that the assistance goes beyond debt and debt suspension to grants and clearing arrears where a country's debt level is no longer tenable.

I hope that the IMF will also be flexible and responsive in the detailed design and implementation to address any potential stakeholder concerns and maintain support for the grants from member countries and recipients. And just as Prime Minister Lee's call helped to shape the global conversation around equitable access to COVID-19 vaccines, that the voices of our leaders such as Senior Minister Tharman, will help shape how the world helps low-income countries.

Beyond increasing our development assistance though, I would like to propose two strategies to go in parallel.

The first is to increase awareness and appreciation of our international assistance efforts among our people. Our youths have grown up in a connected world. They understand intuitively the imperative for us to do more to assist the most vulnerable. So, we must show the next generation that we are listening and that we have heard them. And for the skeptics, we must continue to demonstrate to our people that our international assistance efforts can make us all better.

Secondly, we can encourage more of our people and our businesses to learn expertise and participate in the development and implementation of assistance programmes on the ground, particularly for lower-income countries in the region. This will help our people understand the region better and support our regionalisation and internationalisation efforts, bring us back to where I started, that the world is interconnected. With that, I support the Motion.

Debate resumed.

The Minister for Transport (Mr Ong Ye Kung): Mr Deputy Speaker, thank you for the generosity of time. I hope I do not have to use it. I thank the Members for their support for the three Motions.

Let me try to answer some of the questions raised, starting with Mr Liang Eng Hwa who asked the reason for doing this. I think the simplest reason is we are helping the most vulnerable countries in the world. We are talking about countries like Afghanistan, Ethiopia, Nepal, Tanzania, Yemen, where the pandemic has really ravaged lives and livelihoods. And so, something like the CCRT will help, through debt relief, free up much-needed resources to tackle the medical, social, economic problems that they are facing.

If we take a step back, the reason is really that we live in an interconnected world. And so, it is in Singapore's interest to be part of this international community where we work together, where we cooperate, where there are rules, there are norms, there are best practices that hold every country into account to ensure that we live peacefully together in a global village.

So, in such a system there will be benefits, there will be obligations. And on balance for a small city-state like us, the benefits far outweigh the obligations and the costs. In fact, it is existential for us to live in such a global international cooperation system. That is why we want to do this.

Is there visibility? Yes, all the funds are subject to the oversight of the IMF Executive Board. Singapore is represented in the Board through the voting group of Southeast Asia. And so, we get an update and from time to time the IMF would publish reports, to update on the progress of all these funds.

I thank Assoc Prof Jamus Lim for supporting this Motion and for giving us this lecture about how for a small country, it is much better for us to help others and make sure that if the region, in poorer countries do well, so will we. And in fact, I think what he has just described, is 50 over years of foreign policy and one of our key tenets – which is we want our neighbours to all do well, we want our region to do well. That way, there is global cooperation that a small country like us, can also do well.

Which is why for so many years, we contribute on various international fora, whatever we can do within our means as a small country. Today, we talked about IMF, but for many years, MFA had the Singapore Cooperation Programme. We do not contribute money per se, but we run so many training programmes and invite government officials, representatives of NGOs and other organisations to come to Singapore. We provide necessary training, they take reference on what we do, we learn from each other. And I think it started in 1992. As of now, we have trained more than 130,000 officials all around the world, at our expense.

Today, I am in MOT. I can see that whether it is ICAO or IMO, we have participated in all kinds of capacity building programmes, contributing to the greater common good. We talked about the Paris Agreement, we had launched the Green Plan and had a long debate on the Motion on climate change. And we too, contribute to the Paris Agreement.

Our contribution is always commensurate with our size. It is not big. But I think it is important for us to contribute and it is beyond money. Often, it is about our know how. We learn by doing, and whatever we have learned, we share with the world. And sometimes, those are the lessons that are priceless. Likewise, we learn those lessons from others and those are priceless.

Assoc Prof Jamus Lim did say we should increase our monetary contribution. In the IMF, it goes by your voting rights and your quota. There is a formula. We go by that formula. But, of course, if you contribute more, the fiscal burden is higher and it has to be funded by tax collections as well. For us, as a small country, our stance is better not to go around to say that we have all these resources, we can give out more money. But instead, we are always struggling for relevance, always fighting to earn a living. And along the way, we learn many lessons and we can share those lessons with the rest of the world. I think this is a better way for Singapore to contribute to the common good and the larger global society.

Ms Mariam Jafaar gave a couple of good suggestions on raising awareness and educating the broader public including businesses on the work that we do internationally and how much Singapore can help. I think these are very good suggestions. When MAS put out our press release on these IMF contributions, it was a little bit disappointing because if you look through the threads, there were quite a few criticisms saying, "Why is Singapore giving out money to other countries?"

Frankly, within MAS, when we reviewed that, we were a little bit disappointed. So, I am quite glad that today, all the Members that stood up and spoke about this, supported this contribution to the IMF grants. It shows that as a small country, we can also be big-hearted, that we can also play our role. I think we also share our concern for the future of humanity and we will do our part. What Ms Mariam Jafaar suggested is a good idea and we will see what we can do to raise awareness of what we can do internationally. Mr Deputy Speaker, I beg to move.

Mr Deputy Speaker: No clarifications?

Question put, and agreed to.

Resolved, "That this Parliament, in accordance with section 6A(2)(d) of the Bretton Woods Agreements Act (Chapter 27 of the 2012 Revised Edition), resolves that the maximum amount of grants that the Monetary Authority of Singapore may give under the bilateral agreement (or its subsequent variations) to be made by the Monetary Authority of Singapore (on behalf of the Government of the Republic of Singapore) with the International Monetary Fund to support the Catastrophe Containment and Relief Trust, is 17,600,000 United States Dollars (approximately 12,300,000 Special Drawing Rights)." – [Mr Ong Ye Kung]