It limited the extension of bank credit in Singapore dollars to non-residents except for economic activity, and buttressed this with some restrictions on interbank Singapore dollar derivatives, such as currency and interest rate swaps and options, which might have helped financial players to leverage or hedge their positions. This policy made it harder for would be speculators to short the Singapore dollar, and signalled unambiguously our disapproval of such speculation. This framework served us well. That we encountered very few speculative attacks in practice perhaps showed that the policy was effective. The strength and stability of the Singapore dollar instilled confidence and kept inflation low. Price stability provided the foundation for sustained economic growth, which in turn provided the basis for continued strengthening of the Singapore dollar. We benefited immensely from this virtuous cycle. Over the past two decades since 1981, the Singapore dollar has risen steadily by more than 70%, on a trade-weighted basis. Domestic inflation has been among the lowest in the world, averaging 2.0% per annum compared to 6.5% for the OECD countries. In real terms, GDP growth averaged 7.6% a year, while GDP per capita in 2000 was two and a half times the level in 1981. Financial supervision MAS’ second responsibility is oversight of the financial sector. MAS was an integrated supervisor long before this became internationally fashionable. When it was formed in 1971, MAS was responsible for both monetary policy and the supervision of banks.

SIMEX was the first financial futures exchange in Asia. Well before exchange linkages became the norm, SIMEX co-pioneered the world’s first mutual offset trading link with the Chicago Mercantile Exchange, facilitating round-the-clock trading. Renamed SGX-DT, the derivatives exchange today trades a broad range of interest rate, fixed income, equity and energy derivatives. A later initiative was the programme launched in 1994 to develop the fund management industry in Singapore. Our fund management industry was small compared with other financial centres. The Central Provident Fund (CPF) system was absorbing the bulk of the population’s long-term savings, and starving the private fund management industry of local funds. The Government liberalised the rules to allow CPF savings to be invested in approved unit trusts and fund management accounts. MAS and GIC went on to give modest mandates to external fund managers, although these could only be the seed money to grow the industry. At the end of 2000, the total assets managed by Singaporebased financial institutions was $ billion, four times the $ billion in 1994 when we embarked on the programme. New directions The approaches that we took in monetary policy, financial supervision and development have served Singapore well. We maintained low inflation and a macroeconomic environment favourable to growth. Our capital markets have grown rapidly over the past few years, while our forex market is one of the largest in the world. With over 200 banks and merchant banks, 150 insurance companies and 160 investment advisors in Singapore, we have become a major financial centre.