SPEECH BY MR S. ISWARAN, MINISTER OF STATE FOR TRADE AND INDUSTRY AT THE ICC BANKING COMMISSION MEETING AT 2 PM ON TUESDAY, 24 APRIL 2007, AT RAFFLES CONVENTION CENTRE, CANNING ROOM

Mr Barry Desker, Vice Chairman, ICC Singapore, Executive Council Member of ICC,

Ms Regina Prehofer, Chairperson of the ICC Commission on Banking Techniques and Practice,

Distinguished guests,

Ladies and Gentlemen.

Introduction

A very good afternoon to all of you, and I would like to warmly welcome our guests from 40 countries across the world to this meeting in Singapore of the ICC Banking Commission.

Growing International Trade

The world has enjoyed an intensification of trade over the past three decades. Since the 1973 oil shock, international trade has grown at an increasing rate, culminating in the 22% growth recorded for 2004. [1] Over this same period, the value of international trade has grown almost 20 fold. This reflects the positive effects of the general trend towards the lowering or elimination of trade barriers. Much hard work has been done under the ambit of the General Agreement on Tariffs and Trade (or GATT) and World Trade Organisation (WTO). Many countries have seen the benefits of opening up their economies and have decided to plug themselves into the international trade system. Although growth has dipped a little to 13% in 2005, the prognosis for international trade over the short- to medium-term remains bright.

Nowhere can this be seen more clearly than in Asia. In 2005, the value of Asia’s trade increased by 16%, driven by both strong inter- and intra-regional trade. Singapore, situated at the crossroads of the world’s trade routes, has benefited from this. Our total trade grew by 13% in 2006 reaching $810 billion, with broad-based growth across most of Singapore’s major trading partners. We expect 2007 to be another good year.

Importance of international rules for documentary credit

The robust expansion of international trade would not have materialised without the existence of sound, credible and widely-accepted rules governing documentary credit. Documentary credit is an integral part of the international trade system as it reduces risk and facilitates transactions. According to some estimates, 15% of international trade, amounting to more than US$1 trillion each year, depends on letters of credit. Without a uniform set of rules to guide banks from different countries, each with their own collection of practices, commercial parties will not be able to easily traverse the maze of different national credit regulations. Costs will go up, and international trade will suffer.

The International Chamber of Commerce (ICC) has played a critical role in helping commercial parties avoid getting bogged down in national credit regulations. Through its Uniform Customs and Practice for Documentary Credits (UCP), banks across the world can voluntarily subscribe to a common set of rules. This introduces uniformity and predictability, and therefore lowers costs.

However, rules are only useful if they are relevant to the needs of users. In that vein, I am glad that the ICC has periodically updated the UCP to take into account the changing practices of the commercial world. The ICC’s reviews have also served as an opportunity to bring onboard new best practices by the banks. I am happy to hear that the UCP 600, the latest edition, has been issued. Its clarification of various issues, for example the duration for checking the compliance of documentation, will be welcomed by users.

It augurs well that parties from each region have been involved in reviewing and updating the UCP. Their involvement shows that the formulation of the UCP 600 has been robust and represents the needs of many countries. For example, I was told that Asia was well-represented in the drafting of the UCP 600. As a result, this prompted the drafters to retain the rules on negotiation credits, as negotiation is an important practice in many Asian countries. However, the rules on negotiation credits have been made more precise and consequently, more useful to the needs of users. It is a measure of the UCP’s continued relevance that it is used by banks and commercial parties in more than 175 countries.

Conclusion

The UCP 600 is an important development that will support the expansion of international trade. I wish to congratulate the ICC for its hard work in consulting widely to solicit feedback to improve the UCP. Its efforts ensure that the UCP will continue to remain relevant to the needs of users.

On that note, I wish you a fruitful meeting and I hope that you will be able to find time amidst your busy schedule of meetings to enjoy the sights, sounds and culinary delights of Singapore.