KEYNOTE ADDRESS BY SECOND MINISTER FOR TRADE AND INDUSTRY
DR TAN SEE LENG AT THE MIDDLE EAST INSTITUTE ANNUAL CONFERENCE
23 FEBRUARY 2021
1 Mr Bilahari Kausikan, Chairman of the Middle East Institute.
2 Distinguished guests, ladies and gentlemen, a very good afternoon from Singapore.
3 I would like to thank Chairman Bilahari for inviting me to open today’s panel, which will be examining the theme “Trade – a Cornerstone of the New East-West Asia Connection”.
4 To better anticipate the Future, we may find it useful to consider two questions.
5 The first is on the Past and the Present:
- How trade has connected and benefitted the Middle East and Asia?
6 And the second question is on the Challenges standing in the way of our hope for the Future:
- How have recent developments, like the ongoing COVID-19 pandemic and increasing geopolitical complexities, disrupted trade flows, and how should countries in the Middle East and Asia respond?
Free Flow of Trade
7 The Middle East has long played an important role in international trade.
8 For centuries, it was a crucial link in the historic Silk Route connecting China and Europe.
9 Today, some 10 percent of global trade flows, amounting to about US$1.8 trillion, depend on the Suez Canal for speed and reliability. Trade flows between Asia and the Middle East have also grown significantly, with Asia as one of the largest trading partners of the Middle East. The growing Asia-Middle East trade not only benefits companies, but also supports good jobs and improves lives in both regions.
10 The importance of free trade and the free flow of goods and supplies are underscored by the COVID-19 pandemic.
- Although the aviation sector was badly hit, maritime shipping continued to connect and facilitate the flow of goods between Asian hubs such as Singapore, and major Middle Eastern seaports like Jebel Ali and Jeddah.
11 From ensuring that trade continues to flow unimpeded, to keeping critical infrastructure such as air and seaports open to support the functioning of global supply chains, Asia and the Middle East have much to learn from each other in strengthening supply chain resilience.
12 I hope that the panel can examine this point in more detail later.
Achieving Synergies – the Middle East’s Participation in the “Asian Century” and Asia’s Participation in the Economic Diversification of Countries in the Middle East
13 Beyond learning from each other, there is potential for deeper economic engagement between Asia and the Middle East.
14 Some experts have written about this century being the “Asian Century”, and noted that Middle East countries and companies are “Looking East” for opportunities, particularly in East Asia.
15 The Regional Comprehensive Economic Partnership (RCEP) agreement was recently concluded among all 10 ASEAN Member States and 5 ASEAN FTA partners, opening up new opportunities for mutual trade and investments.
- When implemented, RCEP will be the world’s largest FTA, covering one-third of the world’s GDP and one-third of the world’s population.
- Given RCEP’s geostrategic significance, there has been interest from countries in other regions, including the Middle East, to join the agreement.
16 This is possible because of ASEAN’s practice of open regionalism as a way to further integrate its economies with the global economy.
17 Indeed, Southeast Asia is a region to which the Middle East should pay more attention to.
- Southeast Asia is projected to be the 4th largest economy in the world by 2030.
- The region’s economy is also projected to recover in 2021, with overall GDP growth expecting to rebound to 5.6 per cent.
18 In particular Southeast Asia’s infrastructure needs present a very large slate of investment opportunities.
- An estimated US$210 billion of infrastructure investment is required annually in Southeast Asia, in order to maintain and sustain its economic growth.
- Government spending and public resources will certainly be insufficient.
- PricewaterhouseCoopers (PwC) estimates that there is a combined annual infrastructure financing gap of US$102 billion for ASEAN countries.
- This gap presents opportunities for Middle Eastern sovereign wealth funds and private sector investments.
19 Singapore is the ideal launchpad for Middle Eastern companies to access Southeast Asia.
- Singapore’s bilateral trade with countries in the Middle East grew at a Compound Annual Growth Rate of 4.2 percent over the past five years to reach approximately US$43.2 billion (SG$57.5 billion).
20 This growth is supported by the Gulf Cooperation Council (GCC) – Singapore free trade agreement, which eliminated tariffs on many products and granted market access to various service sectors.
21 Driven by low oil and gas prices, and the pandemic-induced global economic slowdown, some countries in the Gulf have accelerated their economic diversification efforts.
22 This has thus created opportunities in the region’s own service sectors, such as e-commerce, health, and finance, for Asian companies to look towards as well.
23 In particular, the Middle East e-commerce market is booming.
- E-commerce sales is on track to reach US$69.2 billion in 2021, which is more than ten times the amount of e-commerce sales from just four years ago.
- This rapid transformation is being accelerated by the COVID-19 pandemic.
- A survey found that more than 90% of consumers in the UAE and Saudi Arabia have changed their shopping habits to favour online shopping.
- Majid Al-Futtaim (mah-jeed all fuh-tame) Retail, a conglomerate operating shopping malls across the Middle East, saw online orders for its Carrefour grocery business soar by more than 260 percent from January to June last year.
24 The strong consumer economy in the Middle East provides opportunities that Singaporean companies are already exploring.
25 Take, for example, the food and beverage industry.
- The F&B markets of Saudi Arabia and the UAE combined are projected to surpass US$80 billion by the end of 2020.
- The disposable incomes of consumers in GCC countries are growing at two to three times the global average, and they are also becoming increasingly reliant on supermarkets and hypermarkets instead of small traditional grocery stores for food purchases.
- Therefore, there is much for Singaporean food companies to gain by connecting with and expanding into the region.
- Enterprise Singapore facilitates partnerships between local food companies with franchises and distributors in the Middle East.
- Currently, there are more than 30 Singapore food companies doing business in the Middle East.
- I hope that more will follow.
26 Evidently, there is a wealth of potential that can be unlocked through mutual participation in the economic developments of the respective regions.
Capitalizing on Opportunities Despite Geopolitical Complexities
27 How then, can these opportunities be acted upon, given geopolitical trends?
28 The Middle East probably has more than its fair share of geopolitical complexities.
- Regional rivalries and conflicts between its countries have existed for a long time.
29 But the region’s complexities are being further complicated by increasingly complex US-China relations.
30 Middle East countries have traditionally depended on the United States for defence-related issues.
- This includes purchases of American military equipment, as well as the hosting of US forces.
31 At the same time, these countries are also increasing their economic engagement with China.
- Algeria, Egypt, Saudi Arabia, and the UAE have all signed comprehensive strategic partnerships with China, deepening their political and economic links.
- China has also become one of the largest sources of foreign investment in the Middle East, particularly in the GCC countries.
32 As the relationship between the US and China gets more complicated, the Middle East may find itself having to navigate the intensifying competition between the two giants.
33 ASEAN, like the Middle East, is also facing the challenge of growing complexity in its internal and external relations, such as the South China Sea territorial disputes. Some ASEAN countries have experienced armed conflict in the recent past, while in others, insurgencies continue to simmer.
34 Although these challenges are likely to persist, they have not impeded the ASEAN region’s tremendous strides in trade and economic growth.
- Despite the South China Sea disputes, ASEAN Member States were collectively China’s largest trading partner in the first three months of 2020.
- ASEAN Member States are collectively also the fourth largest trading partner of the US, and last year marked the fifth anniversary of the US-ASEAN Strategic Partnership.
35 Therefore, I would venture to say that these are mutual points of learning that can be unlocked for both the ASEAN region and the Middle East as well.
36 As the Middle East continues to “Look East”, the East-West Asia Connection would undoubtedly grow stronger.
37 And as the regions grow more interconnected, perhaps something could also be said for the economic flows and connections to “Become East”!
38 I wish the panel a fruitful discussion.
39 Thank you.