Transcription
P, let me congratulate you on a truly wonderful tour, divorce. Okay. I think all MAS past and present will be very proud of how you describe what happened in Singapore.
Now, um, I'm told that to earn my tea, I have to key off, uh, with one question, and then we will let the audience, um, uh, come up with much better questions. I think you mentioned the U word. You said Singapore was an unlikely financial center, and then you said that we were a unique financial center, and I think you were right in both cases. The trouble is this, um, you know that a lot of the things that people do can be replicated. And, um, I was just, as you were talking, I was reminded that some of you may know it's an open letter that, uh, when the new government came in in the UK earlier this year, they asked all the different, uh, agencies, uh, to, uh, talk about what they would be doing for their industries to try and promote London. And so the Bank of England wrote a letter, P, to the Treasury. It's on their website, so I'm not putting anything out there that's, uh, uh, secret. And in one of the, um, paragraphs of that letter, it said that it would also look at a suggestion made by some international bankers that they look at the example of Singapore, where the MAS provides a concage service to bankers wishing to grow in Singapore. I sent it to my former colleagues in the FBS because I wasn't sure if they liked being known as concage, but it just shows that, uh, I mean, this is the mighty London looking at an example in an ex-colony of how they might go forward. So we may not be so unique in the future. How are we going to be constantly ahead of the pack?
>> I wish you'd been a concage when you were supervising me. You know, uh, when Brexit happened, you remember there's this thing about, uh, UK needed to be the Singapore on the temps. There's a hot thing, Singapore on the temps. And as reflecting on that, even then, and I still believe that now, u see, Singapore's magic, apart from all the enabling conditions, rule of law, etcetera, which, I mean, obviously UK has the rule of law, they have, you manner of speaking, they speak English, but the main thing that Singapore has which is different, uh, is our nimbleness and our ability to bring everything together. You know, we are today big enough to matter. You know, we have reserves, we have cloud, we have per capita, we have global standing, so we're not inconsequential.
>> But we are small enough to be nimble, so we can bring the public sector, we can bring the private sector, we can bring ourselves sector all together and come to a commonality of understanding and move forward from there. And which is one reason why I think MS can do so many things together. I think we have benefited by size. I joke that, you know, US has 13 regulators, but on the other hand, they're a massive country. Maybe they need 13 regulators. Uh, in our case, I think so, the ability to be nimble and agile helps, and I don't think it's that easy for, um, any other system, larger country, to imitate that. So, well, the second is a bigger issue, issue of trust. You know, today, my view is in the West, in particular, and the UK is one, the US, but most, most of the West, I think for good reason, the financial sector was quite egregious. And so, as you ran up into the 2008, 2009 crisis, a large part of what was happening in finance was not supporting the real economy. And so you wound up with, you know, COS and CLOSs, and frankly, even I didn't understand what they were. But as a consequence, I think many of the regulators were let down. Uh, they also, in some cases, probably were at the forefront of political, um, you know, disquire. And so the trust between the regulators and the, uh, industry broke down. And honestly, 15 years later, the trust has not been reestablished. Maybe it's just beginning to be. And therefore, um, when I, even at DBS, we worked in so many jurisdictions, uh, it was quite clear that in our interface in Singapore, when we talked to the regulators, MAS in particular, but the government in general, you started with the fundamental belief of innocent and proven guilty. And so people were willing to assume that you had best intent, and you could engage in constructive dialogue of why you were trying to do what you were doing. And then there was a disagreement, at least you understood the basis of the disagreement. In many of the Western regimes, I found that you could not approach regulators with the spirit of open dialogue for a long period of time because the first thing was, there is something in it for the industry, right? And so it's taken a long time to get over that, um, the rebuilding trust. I'm not sure it's there, u entirely, even today. So I think that takes some, some time to rebuild.
Then the third piece is this, the, you know, sector development idea piece. So in 2016, this is a two-story. We just, we DBS had started its digital transformation in 2013-4. So I'd been at it for a couple of years with the team, and by then we were convinced that this is just a completely new way of banking. It's digital. It's going to change a lot of stuff. Um, the International Monetary Conference, IMC, is the largest advocacy body for banking. They had their meeting in Singapore that year, and I was at a dinner table with eight other chairmen and CEOs, Wells Fargo, Blay, some of the biggest. And we wound up taking a bet because the other seven, who are all from Western, uh, markets, said at that time, nothing is going to happen because in our case, the regulator will not let it happen. The regulator will put in enough barriers and barricades to not let any of this thing happen. So we're quite comfortable. We don't need to change right now. That was a blinding insight to me that that, uh, the spirit of innovation or the spirit of trying to make or participating in change, which in Singapore had been there, I, the regulatory apparatus in the UK, in in the West had stepped back. Now they're coming, you know, people like Augustine Carson, they're coming back with new forms of money.
>> Trump is leading it with the genius act. So I'm not saying this will carry on forever, but certainly where we are today, I do think we have a position to be able to do things which many of our global competitors can't, because of the three dimensions: the nature of our country, the trust between the public, private sector, and the willingness to adapt to new technology forms.
>> Thank you very much. And we have quite a few questions lined up. This gentleman. Yes.
>> Thank you, Push, for your very wide-ranging lecture and the great framework you put together. My name is Satya. Uh, my question is to do with a rather dull and boring sector, which is infrastructure. We talked about the synergy between, uh, the real economy and real economy and the financial sector, and how Singapore has done so well. And I must commend one sector, the real estate, where this has happened so well in terms of the capital markets, and how the assets, not just in Singapore, but internationally, have, uh, been crowded into the Singapore market. My question is with regard to infrastructure assets like ports, airports, and so on. Uh, is this a bridge too far for these assets, both in Singapore and regionally, uh, to be coming into, uh, the capital markets? Because I think there is a real opportunity for Singapore to capture the space in a much more, uh, synergistic way, uh, by also creating, uh, allowing for price discovery to happen in a well-managed financial center. Thank you.
>> Thank you. So, you know, the issue with infrastructure finance has always been challenged for banks. One of the challenges has been duration, right? So these are long-term projects, and banks generally have short-term money. So duration risk has been a challenge. We've tended to be commercial. But the bigger challenge has been political risk. It's not commercial risk that stymies the development of the sector. It is political risk because most infrastructure projects extend beyond the lifetime of a typical government. So a government will launch a project saying, we want to do road, we want to do port. There'll be a change. The opposition will come in. The first thing the opposition does is, I don't want to do the part plot. I don't want to do the port. And then you're left hanging. So the biggest lubricant is, you've got to go and make sure you get political discover. And the political discover is an incremental cost in the system which you don't get for any other forms of commercial this thing. So that's been a challenge, and that continues to create a pricing problem between, um, the, the, uh, what your price discovery, what investors are expecting to get, and what from a return standpoint, the sector finds financable. The problem gets compounded when some parts of the infrastructure are direct public utility goods. So some of the biggest challenges are if electricity or roads, and if you go and try to change electricity rates or try to change the toll road rate, you have strikes and you have, you know, civil unrest. So governments are very ginger about following through on consumer-driven public infrastructure rates, and so that tends to create another set of problems. I'm telling you why the structure, the sector is an unusual sector. U, by the fourth dimension is green. As I'm convinced that, you know, we all in the middle of a thing where we're going to have to replace the whole carbon-intensive infrastructure sector with a green, uh, less carbon-intensive sector. And that means you're going to have to start pricing for externalities. So I'm saying that even the pricing for current with political risk is a challenge. Pricing for externalities on top of that is a multiple challenge. How do you price for some of the stuff? So it's not an easy sector to be able to do. Uh, that notwithstanding, Singapore is actually not bad. If you look at the five biggest infrastructure finance players in the in Asia, uh, a couple of them are Singaporean, and two, three of them are Japanese. So the only bank players in infrastructure tend to be the Japanese and the Singaporean banks. Uh, but what you said is correct. The long-term solution is to access more and more the capital markets. I think one way to be able to get that and to solve the pricing problem, uh, is going to have to be more blended finance. You're going to have to look at a slug of financing there which prices the political risk, takes the first loss of political risk, or puts in a cheaper form of financing. Then the rest of the pricing stack falls into place quite nicely. I, some of us have been pushing the fact that this is a good role for the supras to play, for the ADBs, World Banks, etcetera, to play, to come in and provide the political risk and the, the low, the first risk, first loss risk cover, and they can do it just through a guarantee form. They don't even have to fund it. So there is some appetite, but it requires resolve from the principal shareholders of these agencies, uh, to be able to let them come in and guarantee first loss. And if you can do that, you could actually create something quite nice, and Singapore could well anchor that.
>> Thank you, V. So, um, we only have 15 minutes and 18 seconds. So, I'm going to try and do something on block. This gentleman, if you could ask your questions, and if the other two questioners have something which is similar, then we can take the, I can try and be quick. Thank you.
>> Thank you very much for your profound insight and wisdom. Uh, my name is Patrick. Um, if you were Singapore's new finance minister or president, what key message would you deliver with the key stakeholders? Second question is, um, what is your, uh, greatest hope and deepest fear for the future of finance in Singapore? Thank you.
>> Wow. Okay. I don't know if the other two qu something similar.
>> Yeah.
>> Yeah.
>> If, yeah. Thank you, Mr. Gupta, for this, um, great talk. My name is Rohan. So, I mean, I kind of understood your talk also implicitly as a story of state-led development over the course of Singapore's, uh, history. Um, and especially in that kind of post-independence period, the state played quite an entrepreneurial role, creating DBS, modernizing the banking system of family-owned banks. Um, and I know that it's continued to play a developmental role. Is there a case that the state should actually return to playing an entrepreneurial role again in the financial sector, creating financial, you know, uh, financial firms, creating the new DBS, whatever form that takes. And if so, maybe not. And if so, how can one do that in a liberalized financial sector in a global political economy where you know you cannot protect the domestic sector from the foreign one like you could, um, back in the mid-20th century. Thank you.
>> Thank you. Um, would you like to ask your question as well, please? Then you can sit down so that you don't have to keep standing.
>> Thank you so much. Hi B. My name is Michelle. Um, you spoke about the equity markets and how we made the regulatory choice to lean towards trusts rather than innovation, and that could be a reflection of the investors we had at the time with much lower financial literacy. But now we have a new generation of investors who are much more willing to invest in even risky things like crypto. So what lessons can we learn from the past to cultivate a new generation of growth-oriented investors who can then hopefully support more Singapore-originated growth companies. Thank you.
>> Thank you. So future finance. Oh, we have one more in the front. Yes, please.
>> Thank you. Still, uh, I know, uh, Bush in his, uh, interview after he retired, he said time is a premium, so I try to keep it short. Um, your, I thank you very much, congratulate you, you know, for congratulations for this excellent presentation, and also, I know I'm a humanities person, so there's a lot of heavy stuff, but it's really solid presentation. Thank you very much. My question is on trust, which you touched on a bit just now, and I wonder whether, how did we fare, Singapore fare in terms of that trust element of trust to be one of the leading financial centers in the world? And when I say trust, I think you touched on about the local element of trust was quite solid, was quite good, but what about the region, especially Malaysia, Indonesia, when you have the element of history, politics, culture, race, and it's easier, I suppose, to handle with Europe and America, but what about the element of trust in the context of Singapore and our immediate neighbors, ASEAN? Thank you.
>> Thank you. So over to you, future finance minister, president.
>> I tell you, I am in no position and no desire to give any advice either to Lawrence Wong or to Thman. Start with the premise. But, uh, so, you know, I, I think my one thing to, uh, them would be effectively the tilt of my lecture and my series. See, Singapore's success came from, you know, I think collaboration, small, nimble, but it came from a willingness to be bold and unorthodox. In some ways, I would argue it was easier to be bold and unorthodox in the 1960s and 70s when our backs were to the wall and we had nothing to lose.
When you have nothing to lose, you know what you do? You try whatever you can. Uh, it's much easier for us to be unorthodox and bold in 2025 when we have trillions of dollars of reserves to protect, when we have, uh, per capita income which is in the top five in the world, and we have built something for our people. Now you're putting something at stake. You have something to lose. Um, and this is human tendency. All of these behavioral psychologists have proven that behavior, human behavior is, you don't want to lose stuff, right? And so we're in the stage, it's our biases, you know, you have a lot more to lose now. Um, I'm going to choose my words carefully, but I do think that, um, often times today in many parts of the system, both the private sector, people sector, but the public sector, uh, this fear of failure, you know, shorthand, kasuness. Uh, it's actually increased relative to where we used to be, because now the stakes are higher. We have more to lose. And my principle thing would be, the world is changing so fast that what's going to happen in the next 10 years is so profound that we do not have a choice. We must continue to be as bold as we were 50 years ago. And therefore, on the balance, if we have to be bold and take some risk, we don't have a choice, we must take them, because otherwise the game that we know is changing is going to disappear. That's, that's the advice I would give.
My, um, um, question of hope and fear for, uh, what is the question, the hope?
>> For the future.
>> Singapore. So I think the hope for Singapore is quite clear. I will talk about it in my future lectures that I do think that because of the, you know, the agility, nimbleness, and our willingness to change, we could actually be the anchor of a large part of where the world of finance is going. Right? So we could actually create, um, you know, I talked the other day, maybe we should be looking at leaning into the stable coin thing as opposed to leaning out, but we could actually create a lot of stuff, and we could still, like we learned before, potentially protect our domestic from international, but still be at the center of a lot of, uh, change. We still have the capacity to do it, and because we are financially so strong, we have a lot of money that we can put behind it. You know, we have a lot of money that can grease the wheels to make some of these things, uh, happen. So, I do think that we have the possibility of the financial sector to continue to be a significant engine of growth for us and, uh, for the region, if you will.
Um, the fear is, you know, geopolitics is messy, and so while I'm going to paint a picture of where technology can take us and how we can go, uh, the truth though is that we could get caught between two rival camps, you know, a China camp which then starts creating a renminbi world, and a, you know, you still have the dollar is not going anywhere, a dollar world. And, you know, how do you actually, uh, get to a world where each side thinks that you're too close to the other side? And so what does that mean for you as a center who's really, whose strength comes from intermediating flows all around, right?
So you've got to keep an eye on that, but that's not just a finance sector problem, that is a country problem, that's Singapore's problem, okay?
Uh, question on state-led development and whether, you know, I sometimes think Singapore is the best model for state-led development anywhere, right? So people say public sector development doesn't work. You need to be private sector. In Singapore, the reality is half the country is owned by the government. It's owned through Temasek, but it's owned through Temasek. So DBS is 30% Temasek. Singapore Airlines is some percentas. PSA is 100% Temasek. Well, Singapore did something really well, and maybe people like JPA did it. Singapore ensured that the ownership of capital stayed in the hands of the state, but management, they pushed to privatize. That's a really unusual public sector model. In most cases in the world, public sectors fail because the politicians want their friends to manage the public sector. It becomes a sinecure for friends, family, give somebody a job, etcetera. It becomes a, I mean, the ability to actually run a commercial enterprise disappears. But Singapore's got that balance right. The money goes to state, so I sometimes, you know, DBS, we used to give a billion dollars of dividend to the government, NRF, or whatever. That a billion dollars came from DBS, so it's fantastic. You have private sector people running the stuff, and then you fund the state coffers because capital is owned by the state. That's the model. I think it's a fantastic model, personally. So when you say that Singapore, the government created a lot of state companies, they actually created a few, but not, they took over many, but it wasn't that the government, DBS is one, DBS, you're right, the government created, but they weren't that many. As we go forward, I really think the notion of government creating more of these or specific things will be few and far between. They did Temasek, Shuhorn, creating Clifford Capital for the, your question on infrastructure finance, you know, they're trying to say, okay, how do we actually, you know, do that? And no, none of the, the commercial system was doing it, so the Shuhorn created it, and so on. So you'll find some from time to time. But I think the real, um, answer is in creating a set of policies and regulatory frameworks that crowds in private entities and licenses them, if you will. So you can create like digital bank licenses. You license entities and license private sector to come in. There is no dearth of entrepreneurship and ideas. In fact, to my money, where we are today, we need a lot more private enterprise and a lot more private entrepreneurship as opposed to state creating the entities. So the PPP partnership in Singapore should be what it is today. The public sector can, uh, provide capital, provide an enabling environment. The people sector, we involve both through the triparty union as well as the public at large to make sure that thing is protected, and then you crowd in the private sector to actually bring in the innovation drive and entrepreneurship. That's the model I would continue to favor.
U, trust versus, um, um, innovation. What can we, um, do, particularly with the new investors? You know, it's a tricky question, and I'm wondering whether to be a, to pontificate on humanities a little bit. But see, I think one of the best things, I, I've been in Singapore 25, 30 years. One of the best things about Singapore is our public sector. It's fantastic. The world's best public sector. We take the best and brightest, whether you call it streaming or whatever, we take them, they do the stuff, they execute, do policy. One of the downsides of that, um, is that we've tended to become a nanny state. Uh, we become a nanny state to the extent that, you know, everybody relies on the public sector. So everybody relies on the government for everything. And that's an attendant downside of what we created. So there are fantastic upsides of what we created. The downside is the private sector or the individual is all reliant on the same, you know, government will do, right? And that extends over into this domain of individual investors and investor risk-taking capability. Our investors are by and large, um, part of this thing saying, you know, they will be protected. Um, and if you compare that with, like I said, Hong Kong, Shenzhen, etcetera, there's a lot more caveat emptor over there. Buyer beware. The investor takes, you know, lot of individual risk, little bit less of the nanny state, uh, mentality. I'm not entirely sure what is the best way because, you know, trust comes from the fact that investors know we secure the money is secure. So you don't want to give that up either. Uh, I say it's a good thing. I'm not trying to draw the bank line. But for my money, the comment you made was correct. I think, uh, investor education is table stakes. You've got to do it for everybody. But older generation of investors, you know, sometimes find it harder to come to terms with some of these issues. As we now have 50% of our kids go to universities, they used to be much smaller. You have a lot more global awareness and, you know, social media. So a lot of people know what's going on, um, in that world. With continuing investor education, I do think that we should be tilting the bias a little bit more towards this buyer beware, caveat emptor, letting investors express. Uh, I'll tell you something which I used to tell MAS. So five years ago, DBS, we launched in 2020, I think, the crypto exchange. I was convinced that this tokenization thing to do, and we said, okay, we'll do a crypto exchange. And originally, the idea was to only tokenize fixed income, term equities, property. Then I realized that if I, you know, if you don't let them do some trading in crypto coins, we won't get liquidity. So we opened up to do trading in Bitcoin, Ethereum, and so on for fire coins. And but, uh, we did it only for rich people, accredited investors. So I was trying to persuade MAS, saying, you know, you should let me offer it to the public at large. If anybody wants to go and buy something, what's the harm? And of course, MAS, I think a little bit guided by the political masters, said, over our dead bodies are not going there. Now, the point I made to them, though, is every, in 2020, 2021, 2022, $1 billion left DBS accounts, all into crypto. And they were all Gen Z, millennials, young people. Just because they couldn't buy it from DBS didn't mean they weren't buying it. They were all taking this, they were all taking the money out, they were going to the other third-party global exchanges, the Genesis, etcetera, and they were buying the crypto over there. They're buying meme stock over there. So our young investors are a lot more informed. They're following the world. They have social media access. They have investor access. To what extent can we keep corralling them is not entirely clear to me. So my bias is, we've got to reflect and accept that they're better educated. We're teaching them. We can do more focused financial education programs. But you've got to give them the ability to express choices.
Um, your last one on, um, >> trust of our neighbors. So, you know, here's the thing. I think the reason we command trust globally is rule of law. We stay and stand for our word. We are principled. We stand for our position. And for most parts of the world, they know we won't default. In my sector, you know, Singapore is AAA, so AAA just creates a lot of trust. So much money backing us that the chances of Singapore ever defaulting is, you know, I sometimes joke, DBS is a double-A bank, but I used to benefit from a AAA halo because people figured 30% owned by the government, the bank can never go under, right? So it's helpful. But, um, trust with our neighbors requires a little bit more than all of that. The biggest source of distrust I find, I've lived in Indonesia twice. I've lived in Malaysia five years. The biggest source of distrust in our neighbors is the belief that we are too self-serving, right? That it's only about us and ourselves, as opposed to being a little bit more magnanimous, a little bit. I, every time I raise it, I'm told this is not true. Singapore does do a lot for the neighbors and so on. But I can tell you that by and large, that's a general Singapore needs to do more. Um, I do think that's something we should be thinking about. And if you look at how the Japanese and the Koreans operate, including frankly, even on the Chinese, right? They take the long view, and they do subsidize financing programs, project financing programs. They take low rates of return for a long period of time. They build trust through effectively financial subsidies of some form, right? Um, I think we have opportunities to do that without giving freebies, but being a little softer in other things, saying, you know, if you were to create, you have enough money. We created a fund for, let's say, nature-based fund for Southeast Asia, and we were able to participate in, you know, Pahang and then Sumatra and made some this thing. I think it would go a long way to building neighborly trust, and I think it's worth our thinking about because at the end of the day, you don't live in a vacuum, you know, we will succeed if the neighborhood succeeds.
>> So, um, I think we've run up. We, we're actually in injury time. But you know me, right? It is over till the fact. I know this is the, the hardest question is still to come.
>> No, I didn't want to ask you any more questions because you've answered everything beautifully. I just wanted to assure you that as the next regulator who still has to pay utilities and feed the dogs, I've moved to the private sector and I now have to eat what I cooked. So, you're very happy about that, I'm sure.
>> Thank you very much. It was a very enlightening afternoon. I think all of you will agree. Thank you.
>> Thank you all. Thank you. [Applause]