From the archives: His fingerprint on every important policy; Chance to grow, opportunity to excel

Remembering Goh Keng Swee, the economic architect: His legacy can be seen in many thriving Singapore institutions

This article was first published in The Straits Times print edition on May 15, 2010.

Dr Goh Keng Swee had one word to describe the state of the economy when he became Finance Minister in 1959: “wretched”.

Within 15 years, Singapore was described as an “economic miracle”, and within 30, a “developed country”. A large part of the credit for this remarkable trajectory – from Third World to First World, despite the lack of a hinterland or natural resources – can be ascribed to one man of rare and singular talent: Dr Goh.

He, more than anyone else, was responsible for many things that Singaporeans now take for granted – including a stable dollar and industrial parks. And he played a pivotal role in setting up or inspiring many of the country’s economic institutions, from the Monetary Authority of Singapore (MAS) and the Economic Development Board (EDB) to the Government of Singapore Investment Corporation (GIC), DBS Bank, NTUC Income and the defence industries.

He became Finance Minister in 1959 after the general election that brought the People’s Action Party (PAP) into power. He was an obvious choice, given his background in the civil service and his sterling academic record as an economist. Right from Day One, Dr Goh had to tackle a number of challenges: high unemployment, low literacy rates and appalling housing conditions. The country had only $300 million in reserves.

In his first Budget that year, Dr Goh reduced the deficit by cutting civil servants’ pay and increasing the taxation on tobacco. There was of course a peal of protest, even from within the PAP, but Dr Goh was undaunted.

He had all the facts and figures in his head, and would do his own research and craft his own speeches. Retired mandarin Ngiam Tong Dow, who used to work for Dr Goh in the Finance Ministry, recalls how Dr Goh would craft his Budget speeches within three hours on a weekend morning.

With his first Budget out of the way, the next step was to roll out an economic blueprint. What could Singapore do? It could not develop tourism since it had no scenic spots. It could not exploit its natural resources, since it had none. Industrialisation seemed the only way forward.

Never shy to call in the experts, Dr Goh set great store by a United Nations team led by Dutch economist Albert Winsemius. One of the recommendations of Dr Winsemius – who became a close friend of Dr Goh and other PAP leaders of that era – was the formation of the EDB in 1961. Conceived as a one-stop shop that would handle all investors’ queries – from land and utilities to work safety rules – the EDB was charged with the promotion of industrial development and the encouragement of foreign investment.

Temasek Holdings chairman S. Dhanabalan recalls having to draft the memo for the Cabinet’s approval to set up the EDB.

He said: “I was proud of my draft and felt that this would be an historic document since it would mark an important milestone in Singapore’s history.”

But Dr Goh crossed out the entire first part of his masterpiece, which dealt with why the agency had to be set up.

Mr Dhanabalan recalls: “Our political leaders had already understood that industrialisation was the clear imperative for Singapore’s economic development.”

EDB officers had it tough. Out of 40 or 50 visits they paid to various companies overseas, only one company chief would evince an interest in Singapore.

Mr Ngiam recalls Dr Goh telling him that it was the sight of schoolchildren by the thousands – children who might face a future without jobs and homes – that impelled him in his work.

The EDB spawned several divisions. Its finance arm offering loans to companies eventually became DBS Bank; and its industrial estate division – formed first to develop a 9,000 acre (3,600ha) swampland in Jurong, dubbed “Goh’s Folly” by sceptics – later evolved into Jurong Town Corporation.

Jurong was typical of Dr Goh’s daring. The scale of the project was challenging as it involved creating roads, power plants, sewers and drainage – all in the hope of attracting industries.

Not surprisingly, it was not an overnight success. People were reluctant to live in Jurong and foreign investors hardly knew Singapore existed. 

But there was a steady trickle, and Jurong achieved its big breakthrough in 1968 when EDB persuaded Texas Instruments to visit Singapore. It managed to start up its plant in Jurong within 50 days of its decision to invest. On the back of that success, National Semiconductor came to Singapore.

With so much at stake in those heady days, there was little time to fret over what could go wrong. “When you have so many things to resolve,” said Dr Goh once, “you do not worry about whether the thing will succeed or not.”

Mr Ngiam has this to say about his former boss: “In Chinese, he would be seen as both a scholar as well as a warrior, someone who could both conceive and execute.”

Dr Goh was also an extremely prudent man. For example, any project costing more than $1 million would be rejected straightaway the first time it was submitted, recalls Mr Ngiam. Dr Goh’s thinking was that if it was a worthwhile proposal, it would be submitted again – with more figures to back it up. On the third try, the project might well gain approval – but receive only half of what was asked for.

But for Mr Ngiam – and for countless other civil servants at that time – Dr Goh acted as a wonderful tutor and mentor. 

Mr Ngiam recalls. “He would listen to ideas from his officers although he did not accept all of them.”

Chairman of the Singapore Exchange J.Y. Pillay, another civil servant who worked with Dr Goh, recalls: “Dr Goh was the seminal figure of the 1960s, 1970s and early 1980s. His fingerprints were on virtually every significant policy initiative of that period.”

It was not just Singapore’s industrial development that Dr Goh charted, but also its growth as a financial centre.

He oversaw the setting up of the MAS in 1971, merging central bank functions that were then undertaken by various departments in the Finance Ministry.

The former chairman of Great Eastern Holdings, Mr Michael Wong Pakshong, was its first managing director from 1971 to 1981. The South-African born Mr Wong says he will always remember what a great honour it was to be asked: “1971 was a most challenging initiation for the MAS as President Richard Nixon ended the Bretton Woods system of fixed exchange rates. The invitation from Dr Goh to head the MAS is a major career highlight. I remember Dr Goh for his incisive and analytical mind.”

Veteran banker Elizabeth Sam, another MAS pioneer, says that Dr Goh’s creation of the Asian dollar market was a key plank in his strategy.

He also changed the laws to encourage foreign banks to do more business in Singapore – such as providing banking services or lending services to offshore companies. At the same time, foreign banks were kept out of the domestic banking scene, allowing the local banks to grow.

Mr Ng Kok Song, now the group chief investment officer at GIC but who worked in MAS in the early 1980s, recalls Dr Goh having weekly sessions when he would ask his officers to predict the US dollar exchange rate.

“We were challenged, we were under pressure to ensure that our decisions were not only theoretically sound, but these actions were rooted in good market judgment,” he says.

Former chairman of POSBank Tan Chok Kian says: “One of the major policy decisions that helped POSB grow was made by Dr Goh.

“He said, ‘Forget about the tax on interest of post office savings.’ Many people would not be bothered to declare the interest. And as the economy was growing, savings would rise as salaries increased.”

Dr Goh was asked by then Prime Minister Lee Kuan Yew to see how MAS, which was then managing Singapore’s reserves, could get a higher return for the reserves. The result of Dr Goh’s investigation was the creation of the GIC, which became the fund manager of Singapore’s reserves.

It was far-sighted of Dr Goh to see that as Singapore flourished, excess reserves were going to continue to be generated. And it made sense that this task should not be left with central bank MAS – whose focus was managing the currency and regulating banks – but should rather be done professionally and by a separate organisation.

During his time at the MAS, Dr Goh also put in place a tough system of banking regulation – something that has stood Singapore in good stead as scandals rocked other financial centres. 

“Until then, the banks had more or less a free hand in their activities. Dr Goh felt that the laissez-faire attitude was not sufficient,” notes former finance minister Richard Hu.

The reputation of MAS as a tough regulator gave confidence to foreign financial institutions which set up shop here. The sector grew at double-digit rates for most of the 1980s through to the 1990s. 

GIC’s Mr Ng says: “He was a pragmatic, practical economist. He was not so much interested in theoretical ideas, but more in the practicality and effectiveness of actions.”

Singapore Exchange’s head of risk management Yeo Lian Sim – another in a long line of administrators and regulators who worked for Dr Goh at MAS – concludes: “Dr Goh made his economic ideas work for the benefit of ordinary Singaporeans. The discipline of a strong Singapore dollar, effective regulation and international best standards of practice – all this helped create an enduring framework for the development of our financial markets. To bring the framework to life, Dr Goh gave talented people the chance to grow and the opportunity to excel.”

Never in the history of Singapore’s economic and financial growth have we owed so much, across so many fields, to one man: Goh Keng Swee.