Minister S Iswaran at the Singapore Institute of International Affairs' 9th ASEAN and Asia Forum

OPENING ADDRESS BY MINISTER S ISWARAN, MINISTER FOR TRADE AND INDUSTRY (INDUSTRY), AT SINGAPORE INSTITUTE OF INTERNATIONAL AFFAIRS’ 9th ASEAN AND ASIA FORUM, ON 22 AUGUST 2016, 9.15AM AT THE RITZ CARLTON MILLENIA

“INNOVATING FOR THE FUTURE”

Minister Bambang,

Professor Simon Tay,

Distinguished guests,

Ladies and gentlemen,

1.            A very good morning. First let me say that I am pleased to join you this morning for the opening of the ninth ASEAN and Asia Forum.  Every year, governments, business leaders, academics and other thought-leaders convene at this forum to discuss the economic trends, policies and challenges of ASEAN and Asia.  This year, we meet at a time when the global economy is sluggish, the US, China and Europe grapple with economic and political uncertainty, and when technology is disrupting businesses and jobs at an unprecedented pace.

2.            We also meet at a time when the political rhetoric and public opinion on globalisation and economic integration have taken a negative turn in many parts of the world.  Despite the evidence of the benefits in terms of economic growth and better living standards for people, we see increasing scepticism about the value of keeping economies open and integrated.  Traditionally open economies like the UK and the US are now facing significant challenges in the forms of Brexit, and managing its consequences, and a particularly divisive presidential election campaign in the United States.  Some of these headwinds arise from the genuine concerns of citizens who feel they have not benefited but, in fact, may have even been harmed by an open economy.  Indeed, it is incumbent upon every government to implement policies and execute them diligently to enable its citizens to participate in and benefit from economic integration, directly or indirectly.  However, we must not allow such anti-trade perspectives seizing the policy agenda because that would be detrimental to the long term interests of our countries and people. 

Economic integration helps ASEAN SMEs and households

3.            For example, one of the key pillars of ASEAN has been economic cooperation and integration amongst the ten Member States.  And this has indeed served us well.  Between 2007, when the ASEAN Economic Community (AEC) blueprint was first adopted, and the end of 2014, ASEAN’s GDP doubled, and GDP per capita increased by 76 per cent.[1]  Today, although the global economy remains soft, the outlook for ASEAN is promising, underpinned by strong fundamentals and the opportunities that our efforts at economic integration have resulted in.  ASEAN’s GDP is expected to grow at an annual average of 5.2 per cent between 2016 and 2020.[2] 

4.            ASEAN integration allows the ten component economies to effectively compete for international investments with a collective market of 600 million consumers and a rising middle class.  The AEC boosts not just the headline GDP growth of the region, but also brings real benefits to our businesses, especially small and medium-sized enterprises, and households in several ways.   

a.    The region is important and immediate as a source of input and a market for our SMEs and larger businesses.  Tariffs are often the first hurdle encountered by enterprises engaging in cross-border business.  Through the AEC, we have created an economic zone that is almost tariff-free for products made in ASEAN.  Brunei Darussalam, Indonesia, Malaysia, the Philippines, Thailand and Singapore have already committed to eliminate 99.7 per cent of tariff lines for goods from other ASEAN countries under the ASEAN Trade in Goods Agreement.  The remaining countries are expected to follow suit over the next three years.  Tariff elimination means cheaper inputs, which in turn means reduced business costs, and better price competitiveness for our companies.   

b.    Regional integration also means better harmonised regulatory systems.  For instance, we promote competitive markets and sound competition policies to ensure that new businesses, particularly if they are small in size, are not prevented from entering both the domestic and regional market by anti-competitive behaviour.  It is noteworthy that nine out of the ten ASEAN countries have already enacted competition laws and established competition agencies.

c.    For the people of ASEAN, growing local enterprises means more opportunities and jobs.  SMEs account for nearly 99% of all business establishments in ASEAN, and SMEs employ at least half of the workforce in every ASEAN Member State.  Apart from employment, ASEAN consumers will be able to choose from a broader range of competitively priced goods and services from a more vibrant marketplace.   

Economic integration is even more important in the digital era

5.            So it is evident that economic integration has, and in many ways, will continue to sustain opportunities and better living standards for the 600 million residents of ASEAN. But such economic openness and integration will become even more important in the coming decades, as digitisation pervades our economies.  The digital economy, in its most basic form, involves e-Commerce – the buying and selling of products and services through the Internet.  But the implications of digitisation are much more far-reaching and go well beyond online transactions.  The media we consume is increasingly delivered on digital platforms, with companies like Netflix and YouTube that challenge traditional broadcasting business models.  As internet and mobile penetration increases, companies like Uber and Grab have found that they can disrupt traditional taxi businesses by providing entirely new types of services.  e-Payments will become necessary and proliferate, bringing new opportunities to companies in fintech and digital authentication.  Devices, equipment, vehicles, factories, warehouses and headquarters will be connected digitally through the internet-of-things, and will be able to send data across platforms to help businesses optimise their operations.  New business opportunities will arise for companies who can help others make sense of the growing pool of data, and who can assure consumers and businesses that their data and digital transactions are secure.  All of this will take place in the digital space which will matter as much as, if not more than, the geographical spaces and boundaries that we have all grown accustomed to.

6.            Hence, in the next phase of economic development, ASEAN Member States must embrace digital connectivity so that we can thrive in the future economy.  We are already the world’s fastest growing region in terms of internet adoption, with 3.8 million new users coming online every month.[3]  If ASEAN governments support digital connectivity and ASEAN businesses keep pace with the shift towards digitisation, the pay-offs will be significant.  By some estimates, the ASEAN digital economy has the potential to grow to 200 billion US dollars by 2025, with e-Commerce accounting for 88 billion dollars.[4]

SMEs win in an integrated digital economy

7.            ASEAN SMEs, especially, stand to gain significantly if we can build an integrated digital economy. Let me explain why:

a.    For one, an integrated ASEAN digital economy will offer our SMEs a cost-effective way of reaching out to a significantly larger consumer pool.  Take e-Commerce as an example.  With e-Commerce, sellers of goods and services are able to penetrate overseas markets without the cost of establishing overseas commercial outfits.  This is a boon to small businesses in particular, who can free themselves from the burden of overheads whilst testing out new markets without making heavy investments.  SMEs that are online are more discoverable to a larger base of consumers, because it becomes a simple matter of Googling and clicking.  One home-grown SME that has embraced a digitally connected ASEAN is BeMyGuest.  BeMyGuest is an online travel platform that provides operators of local tours, attractions and activities with the technology to sell their products to travellers online.  It now offers more than 14,000 activities by 4,000 operators in ASEAN, many of whom are mom and pop businesses that run activities from day tours to local cooking classes.  BeMyGuest’s founding objective is to empower local operators, by connecting them to the giants of the travel industry, including online travel agencies, hotels and airlines, and help each of them reach out to a broader consumer base.  So the micro and small operators across ASEAN that have linked up with BeMyGuest have also benefited.  In October 2015, BeMyGuest signed a deal to integrate its offerings with China’s largest online travel site, Ctrip, and subsequently, other major players in China.  As a result, BeMyGuest has seen ten-fold growth in monthly bookings.  This year, BeMyGuest was listed alongside companies like Airbnb and Uber as Fast Company’s top 50 most innovative companies.

b.    Secondly, digital technology can also help SMEs punch above their weight and reinvent business models, so that they compete more effectively against larger companies.  For instance, a Singapore company, Castlery, uses digital technology to allow customers to browse and customise furniture online, which the company then builds and delivers to their doorstep.  With this digitally-enhanced business model, Castlery has also been able to streamline its supply chain and cut down on warehousing costs.  Because it offers customers high-value service and bespoke products at a more competitive price, Castlery has been able to distinguish itself from larger, traditional furniture stores.   

ASEAN must continue to work together towards integration

8.            And it is in recognition of these fundamental trends, ASEAN Member States have collectively drawn up the ASEAN ICT Master Plan (AIM), in order to move towards a digitally-enabled, inclusive and integrated ASEAN community.  In the run up to 2020, it is important that we stay focused on and committed to the five goals of this masterplan:

a.    To create an inclusive digital economy through digital education and the extension of ICT to underserved communities;

b.    To embrace next-generation ICT as a horizontal enabler in the public and private sectors;

c.    To build interconnected Smart Cities;

d.    To enable an interconnected and interoperable digital economy within the AEC; and

e.    Finally, to develop trusted online market places, buttressed by strong security measures, to promote inter and intra-regional trade.

9.            But to stay ahead of the game, we must also turn our minds to the challenges that the digital economy poses.  How can we facilitate free but secure cross-border flows of data?  How do we develop a regional e-Payments network, with the level of penetration and flexibility needed to support our companies as they grow and digitise?  We will also need to update our approach to trade facilitation, to ensure that the trade architecture that has served us well over the past few decades does not become a hindrance to this new wave of digital opportunities for our SMEs because in a digital economy, we prize speed and leans towards small value, small volume transactions. And this is really in the sweet spot for many SMEs.  The ASEAN Single Window, which will expedite customs clearance and help customs authorities exchange information electronically and seamlessly, as well as the ASEAN Customs Transit System, which seeks to reduce uncertainty in the length of time it takes for goods to transit within ASEAN, are important and laudable steps in the right direction, though there is more that we can do in the next few years.  And this should really be front and centre of the economic agenda of ASEAN.

10.         Earlier this year, Indonesia revealed its e-Commerce roadmap, which will lead the country to better communication infrastructure, faster and cheaper logistics facilities for e-Commerce businesses, and stronger cyber security and consumer protection, amongst other things.  In Singapore, the Committee on the Future Economy, which Prime Minister Lee Hsien Loong commissioned last October to map out the national economic direction for the next ten to fifteen years, has also identified the digital economy as a major driver of growth.  Over the next few months, the Committee will make recommendations to develop key digital capabilities and enhance Singapore’s connectivity, digital and otherwise, to the region.

Conclusion

11.         Let me conclude by saying first, that ASEAN Member States, and in general the people of ASEAN, must resist inward looking tendencies that we see around the world, stay the course, and continue to build the integrated, single market we laid the foundations for almost fifty years ago.  The digital economy offers a new degree of freedom and a new wave of opportunity for our businesses and our people.  It can also be a modality for ASEAN’s economic engagement with its partners through the Regional Comprehensive Economic Partnership and other initiatives at a broader regional level and also at a sectoral and company level.  If we identify and harness well the potential in digitisation and other emerging technologies, the future for our region will be one of cooperation, opportunity and prosperity for all.  

12.         I wish you all a productive Forum.  Thank you for inviting me.

[1] A Blueprint for Growth, ASEAN Economic Community 2015: Progress and Key Achievements”, 20 November 2015

[2] Economic Outlook for Southeast Asia, China and India 2016, OECD Development Centre

[3] Estimates from World Bank and Google

[4] e-conomy SEA: Unlocking the $200 billion digital opportunity in Southeast Asia, Temasek Holdings and Google, 2016.