IMF lauds Tharman's panel leadership in tough times

His four years of helming IMFC earns the 'deep appreciation' of global body
By Jeremy Au Yong, US Bureau Chief In Washington, The Straits Times, 20 Apr 2015

MEMBERS of the International Monetary and Financial Committee (IMFC) thanked Singapore Deputy Prime Minister Tharman Shanmugaratnam on Saturday for his leadership as his four years at the helm of the committee came to an end.

A communique released after a meeting of the policy steering committee of the International Monetary Fund (IMF) expressed deep appreciation for Mr Tharman's "service and guidance as IMFC chairman during challenging times".

He was also presented with a framed resolution of appreciation from the IMFC and a gavel he used while he was chairman.

The Singaporean minister became the first Asian to lead the IMFC when he was selected as chairman in 2011, at a time when much of the global economy was still reeling from the financial crisis. When his three-year term came to an end last year, the IMFC extended it for another year.

He is succeeded by the governor of the Bank of Mexico, Mr Agustin Carstens.

Reflecting on his time at the IMFC, Mr Tharman said he had tried to create a culture that allowed big and small countries to speak with an equal voice.

"The legislative changes in quotas, voting shares and representation on the board are the formal changes in governance and laws, and are important for the IMF's legitimacy. But the changes in culture of the institution are equally important," he said.

"What I have really focused on is building up a culture where peers among ministers from around the world treat each other as equals. And we have some excellent peers in Latin America, Africa and Asia, and in the small European countries that do not hold large voting shares, who really bring serious thought to our discussions. So, it is now a more level field in our discussions, where it doesn't matter how small your country is or what the income level of your country is, you are taken very seriously in the IMFC."

He said the fact that the IMFC chose a Singaporean as its head was a testament to the country's credibility.

"In fact, we were not even a member of the IMFC over the four years I was chairman."

THARMAN ON...

Singapore's position in the China-led Asian Infrastructure Investment Bank (AIIB):

It is too early to talk about who holds which management positions and so on, but we are interested in playing a role... The first priority is sorting out the Articles of Agreement of this new institution, and we have been very involved in the discussions with the Chinese authorities as well as the other prospective founding members.

We are not pushing for the AIIB to be centred in Singapore. More important is how it is run, that it serves the needs of the region and that Singapore is plugged in. This is more important than location.



The AIIB competing with the World Bank and IMF:

I think a bit of competition doesn't harm either, as long as it is competition that raises the standards of project selection and project monitoring. It must not be competition that lowers standards as countries play off one development bank against another.

A bit of competition doesn't harm, and the AIIB has made clear its intentions to be run on the basis of the highest international standards.

Now that we have a wide range of countries participating as respective founding members, I think there is a broad interest in making sure that is the case.



The recent Cabinet reshuffle:

One of the strengths of the Singapore Cabinet system is the ability of ministers to move from one portfolio to another. It is a real advantage over time.

For instance, when we discuss a policy on education, apart from the current Education Minister, we have three other former education ministers. Likewise, when you look at health, transport and other areas, there is knowledge and sensitivity to the complexities of each area of policy that is shared in the Cabinet. We avoid the lurches back and forth that you often see in countries where a new person takes over and decides on his or her own priorities.

It also builds up our team. This is about building up the individual leaders who have to play an important role in future. Succession and developing future political leaders is a key task in Singapore.



Former Minister for Social and Family Development Chan Chun Sing taking over as labour chief:

Being in NTUC (National Trades Union Congress) is a position with heavy responsibilities, with broader significance than meets the eye. It is not just representing workers' interests in traditional bargaining. It is also about helping everyone upgrade and do well, and enabling our whole society to do well. It is not just a traditional role of a union, and Mr Chan has a good sense of that.

MAS 'will continue twice-yearly S$ review'
Tharman dismisses talk of a shift in how the Govt manages the economy
By Jeremy Au Yong, US Bureau Chief In Washington, The Straits Times, 20 Apr 2015

SINGAPORE is sticking to the twice-yearly review of its foreign exchange policy, Deputy Prime Minister Tharman Shanmugaratnam said, dismissing suggestions that the unexpected shift by the Monetary Authority of Singapore (MAS) in January marked a more fundamental change in how the Government manages the economy.

Investors and economists have been caught off-guard twice this year by MAS, which adjusted the foreign exchange band in January, when no one expected it to, and then maintained the status quo last week, when many anticipated another change. Some analysts even suggested that the Government would increase the frequency of its monetary policy statements - made every April and October - due to a more uncertain macroeconomic outlook.

Speaking on the issue for the first time since the announcements, DPM Tharman, who is also Finance Minister, said it did not make sense for the foreign exchange policy to be changed too often.

"We are already providing for fluctuations within the band, and to change the band often would be most unwise. It will lead to too much uncertainty, too much front-running each time people anticipate a change, and the uncertainty isn't going to help the markets or the economy," he said, noting that having an exchange rate band requires less frequent tweaks than trying to maintain an interest rate.

MAS uses an exchange rate policy as its monetary policy tool, unlike many other central banks, which use interest rates. Mr Tharman stressed that the policy is focused on the medium term.

"Our time horizon when we think through the implications of exchange rate policy is basically two to three years. It is not about the next six months. It is a two- to three-year perspective. And the reason is that there are long lags between the changes in exchange rates and actual inflation and growth. So, it is not a good idea to revise our policy often because it takes a long time to have an effect to begin with," he said.

"The policy is working quite well... Only twice have we had to announce a change in the band outside our six-monthly cycle."

These were in October 2001, when the dot.com bubble burst, and in January this year because of plunging oil prices.

In a wide-ranging interview with Singapore media, Mr Tharman, who was in Washington for the International Monetary Fund-World Bank meetings, also gave a broad outlook for the global economy.

He said the predominant concern among leaders at the summit was not so much the short-term shocks that would come when the US Federal Reserve raises interest rates, but the build-up of financial risks caused by having had low interest rates for so long.

"The key issue concerns the risks of not normalising - the consequences of keeping interest rates where they are and sticking with a very easy monetary policy over a long period, in the US, in Europe and Japan."

Mr Tharman said the unprecedented period of low interest rates had come at a cost - higher risk because of investors putting money into less-safe assets in search of yield, pension and insurance funds put at risk of insolvency in the long term, and the fact that interest rates could no longer be used to deal with business cycles.

He added that politicians had put off more politically difficult structural and fiscal reforms and simply relied on monetary policy.

"It is critical at this stage of the recovery, if we want to sustain the recovery without building up risks in the financial system, we have to shift the balance of responsibilities away from a very strong focus on monetary policy by central banks towards fiscal reforms and, critically, structural reforms," he said.