Slightly more than 40 years ago—on 22 May 1981 to be exact—erstwhile lawyer and banker Yong Pung How was issued the certificate of incorporation of the Government of Singapore Investment Corporation, or what we now call GIC.
To the casual observer, the incorporation of GIC was a non-event. It was not marked by inauguration ceremonies, nor did it receive press coverage. However, the absence of fanfare belied the importance of the event for Singaporeans: the founding of GIC was a water-shed, a game-changer in the way the country’s foreign reserves would be managed.
Bold Vision: The Untold Story of Singapore’s Reserves and its Sovereign Wealth Fund recreates the vision, creativity and drive that led to the founding of GIC. However, as the title intimates, the story that is told here is also about how GIC is part of the larger tapestry of how Singapore has managed its reserves since it gained its independence in 1965. While the founding of GIC was a landmark development, GIC was not born in a vacuum. It had a prehistory, as it were, for its values and ideals were forged in the crucible of Singapore’s financial experiences in the country’s formative years.
The book is divided into two sections. The first section (“Laying the Foundations”) deals with the pre-GIC period. It discusses three dramatic episodes concerning the reserves, all occurring soon after independence: the failure of negotiations to continue with a common currency with Malaysia; the decision to maintain the currency board system rather than establish a central bank; and the diversification of Singapore’s reserves from sterling. Then, the section covers the first attempt to institutionalise the practice of reserves management and the subsequent formation of the Monetary Authority of Singapore (MAS).
It might be easy to dismiss events in the pre-GIC period as “ancient history”, so outmoded do communications, technology, financial markets and other facets of life then, look now. But the developments of that period narrated in the book portrayed themes that would anticipate the principles underlying Singapore’s reserves management policy today.
One such theme is the close attention given to reserves management by the political leadership at the highest level. The standard was set from the start by Lee Kuan Yew, Singapore’s first Prime Minister, and Dr Goh Keng Swee, his deputy. Both were of one mind when it came to reserves management policy. While there were occasional differences between the two, as the chapter on sterling will illustrate, Lee gave Dr Goh the latitude to drive initiatives concerning reserves management and endorsed the outcomes. In turn, Dr Goh initiated and developed the practice of reserves management in Singapore. He also conceived of GIC. Dr Goh can rightly be called the “father” of reserves management in Singapore. It is therefore fitting for the first chapter of the book to be dedicated to Dr Goh and his contributions to reserves management.
The second section (“Leaping Forward”) covers the genesis of GIC. The decision to establish GIC was both original and audacious. Forty years ago, something like it was not an obvious proposition. Only oil-rich countries had anything resembling a Sovereign Wealth Fund (SWF), and all that Singapore had by way of oil (then and now) was the uncertain sweat of its brow. Other non-oil countries, like China and South Korea, have since established SWFs, but Singapore was the first country deriving its reserves from surpluses generated by its trade and capital accounts to do so. Why and how did Singapore’s leaders, in particular Dr Goh, come to conceive of GIC? What was the rationale for its formation?
The story of how GIC was brought to life is equally significant here. It had to begin operations from scratch and its founding leaders had to resolve fundamental issues. How should an investment management company be started in the absence of indigenous fund management expertise? Should the funds be managed primarily by external fund managers or by home-grown expertise? If the latter, could such expertise be developed and how fast? What would be the appropriate corporate structure for GIC? What about the composition of its Board?
A number of leitmotifs in the GIC story were set very early. They included the indispensability of a can-do spirit to solve problems which had no precedence; the emphasis on good corporate governance; and the conviction that the task of husbanding the reserves was so important it required the attention of the country’s top political leadership. At Dr Goh’s suggestion, Lee became GIC’s first chairman. Both men recognised that the reserves were of such strategic significance to Singapore that they required the oversight of the Prime Minister. Lee remained GIC’s chairman till 2011. During his tenure as chairman, Lee shaped the very contours of GIC’s soul ; such was his influence on GIC’s mission and ethos.
Reserves management is not a subject that normally figures large in the annals of a country’s history. The subject seemingly lacks the drama and the heroic deeds that stir the blood.
There are two reasons for this commemorative book. The first is the singular importance of reserves to Singapore. This is a theme that resonates through the book. Thus, in the very first episode, on the negotiations over the currency link with Malaysia, the Republic’s inaugural Cabinet equated losing control over the reserves to surrendering control of the nation’s destiny to a foreign government.
Over the years, the country’s reserves have secured the financial security of Singaporeans. These reserves have been the guarantor of the nation’s sovereignty; the imprimatur for the country’s triple-A credit rating which meant secure savings and investments for Singaporeans and foreign investors; the firewall which shielded Singapore from the numerous external financial crises over the decades, including the Global Financial Crisis of 2008 and the Covid-19 pandemic; the wherewithal which enables Singapore to improve its social services and infrastructure without hefty tax increases. In short, the Singapore Story – the progress of a small island state since independence – has been underwritten by the investment returns from the diligent management of the country’s reserves.
The book has another message: that the advances in reserves management were not due to happenstance but the outcome of an indomitable spirit to do the utmost for the country’s reserves. In a sense, the book therefore is a celebration of the triumph of vision, duty, will, enterprise and energy. These are the ideals and values bequeathed to, and embodied, in GIC in order for it to fulfil its mission of securing the financial future of Singapore.