Subscription to the International Development Association

Mr Speaker: Second Minister for Finance.

5.30 pm

The Second Minister for Finance (Ms Indranee Rajah): Mr Speaker, Sir, I beg to move, “That this Parliament, in accordance with section 4(3) of the International Development Association (IDA) Act 2002, resolves that an additional subscription of Singapore to the International Development Association, of a sum not exceeding US$70,000,000, be authorised for the purpose of the 20th Replenishment of the International Development Association.”

Mr Speaker, allow me to explain the rationale for our subscription to the IDA20 replenishment.

IDA is the arm of the World Bank Group that provides grants and concessional loans to its least developed member countries, including some of our ASEAN neighbours like Laos and Cambodia. Singapore has contributed to IDA’s replenishments since 2002.

The 20th IDA Replenishment (IDA20), originally covering the period FY2024 to FY2026, had to be brought forward by a year to cover FY2023 to FY2025 as almost half of the IDA19 replenishment of US$82 billion was committed in FY2021 to provide urgent financial resources to support IDA countries that were badly affected by the COVID-19 pandemic.

In December 2021, IDA donors therefore supported a historic replenishment of US$93 billion for IDA20. This 13% increase makes it the largest financing envelope in IDA’s history; and demonstrates solidarity by both developed and developing countries.

As highlighted by my colleague Senior Minister of State for Finance, Mr Chee Hong Tat, when he moved the Second Reading of the IDA (Amendment) Bill last October, as a responsible member of the international community, Singapore will do our part.

During our early days, Singapore had benefited from loans and expertise from the World Bank to build key infrastructure as part of our nation-building efforts. We remember and are grateful for this assistance. We are in a better position today; but we know from experience the challenges developing countries face and we want to play our part and give back.

There are also positive benefits in working with marquee institutions like the World Bank Group. This contribute to Singapore’s place as an infrastructure financing hub for the development of our region. It also creates good opportunities for Singaporeans and Singapore-based companies as the region prospers.

For this Motion, we therefore propose to maintain our contribution share of 0.20% to this larger IDA20 envelope. This will translate to a subscription of no more than US$70 million. Mr Speaker, Sir, I beg to move.

Question proposed.

Mr Speaker: Assoc Prof Jamus Lim.

5.33 pm

Assoc Prof Jamus Jerome Lim (Sengkang): Mr Speaker, I understand that this Motion like similar ones I had spoken on in 2021 on contributions to the International Monetary Fund (IMF) are largely routine and technical and reflect our nation's ongoing commitment as a responsible citizen in the international system, as Minister Indranee has also reiterated.

Funding rounds for the International Development Association either are similar and occur every three years. The Motion before us today is to provide said funding for IDA.

In my earlier contribution to the IMF Motion, I had made the case for why contributing to international development efforts can benefit us by enhancing our hard and soft power. And why doing so even when it does not remain a moral imperative. I have also made the case for why we should systematised official development assistance.

Today, I will elaborate on both of these themes and in particular made a more pointed case for a specialised Singaporean foreign aid agency.

As I had previously shared, I have worked for seven years at the World Bank Group in the past of which either as a part and during my tenure at the bank, I have contributed to the work of IDA.

I also have a small balance in my self-funded group retirement account and a staff account at the Credit Union, but do not currently receive nor maintain any direct financial interest in the bank.

Mr Speaker, the need for us to act on the international dimension is even greater today than two years ago given the challenges faced by developing countries around the world. While the pandemic is largely a matter of the past for us and we have more or less successfully transition to treating COVID-19 as an endemic disease, the ravages of COVID remain very real in other parts of the world, especially in the poorest economies of Africa, as well as Asia.

In Southeast Asia alone, the Asian Development Bank estimates that the region's economic growth was dampened by close to one percentage point and 4.7 million more people were pushed into poverty. This anaemic growth in our neighbours will affect us too because while Singapore's growth rebounded strongly in 2021 and remain solid last year, it is expected to falter this year in part because of tighter monetary conditions worldwide.

In our assistance to our neighbours and major trade partners helps spark better economic conditions in those places. We could enjoy the spill-over effects from their belated recoveries which could in turn offer a neat counterbalance to weakening conditions in advanced economies worldwide.

Singapore has also enhanced its post-pandemic soft power. Members of this House, including those of the Workers' Party, have flagged certain refinements to our approach assessments of our overall pandemic response and subsequent reopening, have on net been positive. That said, according to an index developed by the University of Southern California, the weakest aspect of Singapore's soft power remains our international engagement.

Enhancing our foreign aid profile can, therefore, further bolster our outreach to our neighbours and improve our foreign relations accordingly.

To be clear, IDA and the World Bank remain among the most effective, transparent and development-focused institutions. If we were to decide that it is a good idea to channel financial support to multilateral development agencies, we can do far worse than doing so through IDA. But even multilateral agencies that have a solid reputation for largely unbiased foreign aid practices may end up inadvertently being subject to quid pro quo exchanges, especially between large players.

Furthermore, while there is solid reason to support development in the poorest nations globally, the nature of multilateral development agencies is that their support is not solely targeted at countries in Southeast Asia, which is our immediate neighbourhood.

We wish to have more directed support in a manner that could potentially spill over onto our shores. A somewhat different tool is required. That is why I wish to go a step further and explain why it s also in our interest to form a small but dedicated foreign aid agency, much like how we already appropriate development funds for various longer-term financial commitments.

One approach that can help seed the initial formation of a foreign aid agency is to set aside IMF and IDA subscriptions, along with a very modest budget for official development assistance into a development fund. This fund can then be managed directly by a foreign aid agency – call it Singapore's Assistance for International Development or SingAid.

The agency need not be large. Indeed, to the extent that we already have civil servants within MFA, whose work is mainly focused on external finance and economic relations, we can hive them off to this new agency. We can supplement this professional team with a stream of rotational staff and interns, especially those who have an interest or experience with international economics. For example, we can second MFA staffers who deal with international economic relations to this body and then absorb a small number of university interns annually. Over time, the agency can even be an oversight body that allows us to launch, perhaps an international volunteer corps – another initiative that I had previously advocated for.

One concern that some may have about bilateral development agencies of this nature is how they may become tools of foreign policy and consequently the aid offered becomes ineffective at best, or could even end up harming the countries it purports to assist at worst.

We can pre-empt such concerns in a few ways.

First, as I have already alluded to, we can keep the agency's mandate narrow and budget tight. This will keep the body focused on its core principles and discourage adventurism. Indeed, if we believe more in our ability to insulate such an agency from political interference than we do others, especially multilateral institutions a homegrown institution may be an even more efficient way to deliver official development assistance.

Secondly, our bureaucracy is famously effective and efficient. I see little reason why we would run the proposed SingAid without the same technocratic vigour. Aid tends to be best delivered when conditional on good policy and we have an abundance of technical knowledge in this area, having gone through our own development journey in exceedingly rapid fashion.

Third, perhaps most importantly, our foreign policy interests are, by and large, largely remarkably neutral. While neutrality is not formally enshrined as a foreign policy doctrine, we have pursued a pro neutral approach since our Independence and our emphasis on fundamental bedrock principles such as respect for sovereignty and the rule of law, along with the pursuit of mutual interest, is aligned with this.

This is an ethos in fact for our entire Public Service and I see no reason why we cannot infuse such principles into a nascent aid agency that is likewise imbued with the same set of principles and avoids the risk that the body descends into becoming a geopolitical tool. If anything, what I am suggesting is that the proposed SingAid focus on providing foreign assistance with an eye on win-win economic outcomes.

All that said, Mr Speaker, it should come as no surprise that I am in thorough support of the Motion and wish that it in fact goes a little further.

Mr Speaker: Minister Indranee.

5.42 pm

Ms Indranee Rajah: Mr Speaker, Sir, I would like to start first by thanking the Member, Assoc Prof Jamus Lim, for his support for the Motion. Listening to Assoc Prof Lim, I think there is in fact common ground and then there is a part where, perhaps, we have a slight difference of views.

The common ground is: is it a good thing to do, to do something to help developing countries? I think the answer is yes.

Is it common ground that doing so would benefit countries in the region? I think the answer is yes.

And I think also that insofar as this specific Motion is concerned, since Assoc Prof Lim has given his support, I think we can take it that he is in agreement and that this particular issue can be put to rest.

So, the only question is, do we do more? And if we do more, the question is to what extent. And what the Assoc Prof would like us to do is also to set up a foreign development aid agency. I think he even has thought of a name for it. "SingAid" – that was the name he attributed to it.

So, that is where the differences are – which is how much more and do you set up an agency for this.

On the question of whether we should do more – and I think if I heard the Member correctly, he also talked about systematising it. If I remember correctly, that was the word he used.

The first thing I should do is to assure the Chamber and others that contributing to IDA or the World Bank Group is not the only thing that we do. What we do is we take a balanced approach. We look at what is commensurate with Singapore's size and we enter into obligations that we can afford over the long run, after the needs of Singaporeans are met.

When we look at international contributions, we do more than just contribute to the World Bank Group. We have actually done so through various other institutions. Apart from the contributions to the World Bank Group, we also contribute to institutions like the Asian Development Bank, the Asian Infrastructure Investment Bank and the International Monetary Fund. And that, in a way, takes care of the suggestion that it should be done in an institutionalised way, because what we are really doing is leveraging the systems, the administration, the infrastructure and the reach of such international institutions.

But we do more than that. Last year, Singapore contributed humanitarian assistance to Ukraine as well as to the disaster relief and humanitarian efforts following the earthquake in West Java, Indonesia. And during the pandemic, Singapore contributed to the COVID-19 Vaccine Global Access Advance Market Commitment, or COVAX AMC, which helps support access to vaccines for over 90 low- and middle-income countries. We also contributed vaccines to our neighbours as part of our commitment to tide through the pandemic collectively. More recently, Singapore became a founding member of the Pandemic Fund to enhance global pandemic prevention, preparedness and response.

Beyond mandatory contributions, we have also contributed our technical know-how, providing training for close to 150,000 foreign officials under the Singapore Cooperation Programme since it started 30 years ago. And late last year, we announced a sustainability action package at COP27, to support the capacity building needs of fellow developing countries on sustainability and climate issues.

So, you can see that, firstly, we do work with and through institutions to amplify our reach. We go over and beyond that and we make direct contributions. But all of this is part and parcel of a balanced approach.

As a small country, our resources are limited and we have to make sure that every dollar counts. We will prioritise the needs of Singapore and Singaporeans; and use prudent fiscal management to manage our resources well. This allows us to grow the funds and there will be then space for us to contribute to the common good. So, this is what we have done and this is what we will continue to do.

We also do not take our international financial obligations lightly as they often have long durations, and we cannot always predict what economic conditions will be like and what our fiscal situation will be like. So, if you set up a development agency, that is a very long-term commitment and you need to be sure that you can carry this through.

Whilst I appreciate the sentiment within the Member's suggestion, one should also be mindful that we are a small country, we are constrained, we have limited resources. So, our approach is, look after our people. Where we have excess, we give. We give through institutions, we give directly, and we maintain some, so that we can be nimble and flexible.

We must also be realistic to understand with our small size, exactly how much we can do by ourselves. We must also be careful of hubris. There is much that we can and should do, but we cannot do everything alone. And working with others allows us to amplify the impact of what we do. But, that said, I thank the Member for his support.

Question, put and agreed to.

Resolved, "That this Parliament, in accordance with section 4(3) of the International Development Association (IDA) Act 2002, resolves that an additional subscription of Singapore to the International Development Association, of a sum not exceeding US$70,000,000, be authorised for the purpose of the 20th Replenishment of the International Development Association." – [Ms Indranee Rajah]