Good Morning,
Distinguished guests, fellow speakers,
Ladies and gentlemen,
1. I would like to begin by expressing my appreciation
on behalf of Singapore for this invitation to participate in today’s
forum. I would like to thank the China Ministry of Finance and Director-General
Liu for hosting this Forum. We will all have seen much, read much
and heard much about the credit crisis that has reverberated around
the world and resulted in the massive economic turmoil that we are
faced with today. We will each have opinions on what else needs
to be done and I have to humbly admit that I do not think I have
the answer to the question. However, I can perhaps share some thoughts
on it.
Impact of the Credit Crisis
2. As we all know, the current credit crisis is
unprecedented in terms of its severity, geographic spread and its
speed. It has affected all the components of demand, namely consumption,
business investment and housing investment. While this crisis has
not have originated from this part of the world, the effect of it
is also felt very much in this region given the inter-connectedness
of the world’s economies.
3. Singapore is similarly not spared from this
severe global economic storm that still has not shown clear signs
of receding. As an open economy, Singapore's GDP contracted in Q4
of 2008, and our latest forecast for 2009, a forecast that was announced
yesterday is a possible decline by between -6% and -9%.
Actions taken to combat the crisis
4. Amidst the cloudy sky of our global economy,
the silver lining is the positive outcome of countries working together
to offer a coordinated response to the crisis, recognising that
no one country can operate economically as an island. The recent
G-20 London Summit is an example of how countries are acknowledging
that we are all citizens of a global community, and that the remedy
to a global contagion would require all the countries to work in
concert rather than isolation. In the words of Martin Luther King
Junior,
“We may have come on different ships, but
we are on the same boat now.”
5. While I have been asked to consider the G-20
Summit outcomes in my speech today, I can only say that I believe
that some of the best brains and market experts of the world were
at the G-20 Summit working on the co-operative actions needed to
see us out of the crisis. I would thus like to take this opportunity
to applaud the efforts taken by the countries involved and to say
that the recommendations arising from the Summit were comprehensive,
well-thought through; showing a keen appreciation of what has been
plaguing the world’s economies. There is little I can add
to the proposed actions. But I can say that we can all advocate
for the needed actions that must follow from the Summit.
6. While the crisis may have started off as a credit
crunch, we have seen it now turn into a crisis of confidence. People
have simply lost confidence in the efficacy of the global financial
system. Hence, the G-20 Summit’s pledge to restore confidence,
growth and jobs; repair the financial system to restore lending;
strengthen financial regulation to rebuild trust; and to promote
global trade, investment and reject protectionism. It is incumbent
on every country to work towards those agreed actions.
7. In that regard, I would like to pick on 3 areas
of the G20 pledged actions which I believe are especially crucial
for every country to act on. They are growth, free flow of global
trade and investments and jobs.
8. Firstly, growth in each of our markets. Providing
substantive economic stimulus to catalyse each of our countries
to growth will make the difference taken in aggregate towards lifting
global demand. Many countries at this forum have seen our governments
pledge significant stimulus package. Furthermore, we would also
like to advocate greater collaboration amongst countries to mitigate
the effects of the crisis. One example is the ASEAN + 3 countries
(China, Japan and Korea) Finance Ministers discussion on various
collaborative measures. Amongst them is the Chiang Mai Initiative
Multilaterisation. It is one step closer now to finalisation after
the meeting of Finance Deputies just concluded on 8th April. These
countries have put together a US$120 billion pool of funds to help
countries having liquidity problems and we look forward to more
such collaborations.
9. Secondly, countries must continue to promote
trade and capital flows across jurisdictions and break down the
barriers to entry and cross border trade. In times like this, while
it is tempting for countries to adopt protectionist policies due
to domestic political pressures, we suggest that protectionism would
only retard the recovery of global economies. Internationalization
of capital and trade is a non-reversible outcome of globalisation.
The current crisis will not change this. It is thus in all our interest
to continue to promote open flow of capital and trade.
Singapore Government’s Response on jobs
10. Thirdly, on jobs and employment levels. While
it is not that Singapore has the perfect remedy to the crisis, I
believe that it is worth sharing a scheme that the Government has
introduced recently in Singapore for job retention and more importantly
to enable its people to remain relevant and economically active
by investing heavily in upgrading the capabilities of the Singapore
labour force. In the recently announced 2009 Budget we have a whole
host of measures to achieve this. For instance, to reduce unemployment,
a Jobs Credit scheme costing S$4.5 billion was introduced to encourage
Singapore businesses to retain workers and where their business
warrants, to employ new ones. The first batch of Jobs Credits, amounting
S$900 million was given out last month to about 100,000 employers
and that benefited some 1.3 million jobs for Singaporeans.
11. Besides helping companies survive and saving
jobs, the Government has also stepped up training across all levels
of the workforce, including our professionals, managers, executives
and technicians. This is part of we called the Skills Programme
for Upgrading and Resilience. Heavily subsidized training is provided
to enable workers to upgrade and remain relevant in this rapid changing
world. The response for this initiative has been very encouraging.
43,000 workers and 700 companies have already signed on to this.
Role played by accounting standards in the current
crisis
12. Allow me to shift now to focus on what we,
as accounting standard setter could and should be doing to combat
the current crisis and how accounting standards feature in the whole
picture. I fully endorse the view that so many of our leading authorities
in the accounting standards world have made in pointing out that
accounting standards is not a cause of the current crisis. Indeed,
I would say that accounting standards has made the situation more
transparent and clear. It is a continuing journey to improve the
standards, so that financial statements more accurately reflect
the economic substance of the business transaction and of our market
places. I am a strong advocate therefore for the formation of the
Asian- Oceanian Standards Setters Group that will give the region
the platform to provide the input and perspectives of our market
places in the international standards setting process. Forums such
as this, is an excellent platform for sharing our expertise and
experiences on the application of international accounting standards,
and to ensure consistency in application and understanding of the
statements amongst the users and preparers.
13. I am a firm believer that one single international
language of financial disclosure would definitely improve investor
confidence in global capital markets. In order for IFRS to live
up to its full potential, I believe therefore that international
standards should consider the features of major markets around the
world, both East and West. We here have a role to play to ensure
that the legal, business and economic substance of our markets are
understood by those drafting and approving the standards. I would
also suggest that, as standards setters, we remain firmly grounded
on certain critical principles.
14. Firstly, that “Accounting standards must
be crafted in the interest of investors.” As we all know,
financial statements are used by different people for different
purposes. However above all, it is a direct communication between
the company and its investors and from the investors’ viewpoint,
accounting standards should reflect the economic realities of the
business transactions, promoting consistency, clarity and comparability.
15. Next, we should remain steadfast in the commitment
to issue high quality accounting standards that are principle-based.
Instead of making piecemeal improvements, we urge IASB to expedite
its current projects that seek to establish the conceptual framework
and fundamental principles on financial instruments, fair value
measurement, consolidations and de-recognition.
16. Thirdly, the standard setting process must
be transparent and independent. This is essential not only to maintain
investor confidence but to ensure the integrity and quality of the
standards. An independent standard setting process is crucial as
it ensures that the standards are crafted free from national or
regional biases.
17. Finally, it is important for IASB to have in
place a framework that would encourage and facilitate participation
from all the national standard setters in the standard setting process.
There needs to be constant communication and dialogue amongst the
national standard setters as well as between the national standard
setters and the IASB. A forum such as this one is very important.
Just as the national standard setters should actively promulgate
the IFRS issued by the IASB, the IASB should also, in the accounting
standards setting process, take into consideration the unique business
circumstances of the different geographical regions, including the
Asian markets.
18. For instance, we believe that given the legal
framework governing leasehold land in Asia, they should be accounted
for differently from their European counterparts. Hence it would
be useful that the differences be taken into consideration for its
current project on leases so as to better reflect the economic reality
of such transactions in this part of the world. I hope that issues
such as this would form the topics of discussion tomorrow.
19. The Asian-Oceanian region remains a highly
interested group over the developments of the convergence drive
that is happening between IFRS and the US GAAP. The recent changes
in both the IFRS and US GAAP over the mark-to-market standard could
affect transparency and comparability of mark-to-market impact on
financial statements. While I appreciate the huge pressure the standard
setters of the IASB and the FASB are facing from political leaders
and the vested interest groups of different stakeholders, I hope
to continue to see that the standard setting process remains independent
and firmly grounded on sound accounting principles that I think
we all agreed on.
Conclusion
20. We have a long arduous journey ahead and it
would require the coordinated efforts of all of us here and around
the world, to lift the world’s economy out of its current
doldrums. Standing here, seeing all of you, from different countries
and international organisations, gathered under one roof with common
interests, I am confident that we will be successful. I look forward
to the AOSSG preparatory meeting tomorrow and to that extent, Singapore
has volunteered to host the next IFRS Regional Policy Forum. Thank
you.
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