Mr Lee Yi Shyan at the 3rd Malaysia Singapore Business Forum

3RDMALAYSIASINGAPORE BUSINESS FORUM, 29 JUNE 2006

Address by Minister-of-State for Trade and Industry, Mr Lee Yi Shyan

“Building on Economic and Business Partnerships -Sharing Growth and Prosperity”

Your Excellency Deputy Minister for International Trade and Industry Dato Ahmad Husni,

Mr Michael Yeoh, CEO ASLI,

Mr Andy Lim, Chairman PACAL

Distinguished guests, Ladies and gentlemen,

Introduction

Selamat pagi and good morning to all! I want to tell you how happy I am to be back in KL.I was last here about a year ago with my family and 3 other families. We played golf at Bangi Equatorial which is just 30mins drive from this hotel, and had dinner at the famous and colorful Jalan Imbi. This time round I am happy to be back in the midst of old and new friends.

Today’s seminar is entitled, “Growth through Partnerships – Building on Mutual Strengths”. I understand that it will feature panel discussions on youth and interaction between our people, the business environment, and trade and investment flows between Malaysia and Singapore. I want to commend Michael and his hardworking team in ASLI, for organizing today’s seminar and for choosing such appropriate themes. Of course, ASLI should also be credited for its efforts to promote greater understanding and cooperation between our two peoples for all these years.

Given the time constraint, and perhaps as a backdrop for the many discussions that follow, I thought I would like to speak on 4 connections in my presentation today: the (a) People to People Connection (b) Business to Business Connection, (c) the connections within ASEAN and (d) the ASEAN-World Connection.

People-to-people Connection

Tourism

Malaysians and Singaporeans visit each other regularly. On a weekly basis, our national carriers mount about 90 flights between Kuala Lumpur International Airport and Changi Airport. Judging from the seat utilization of the aircrafts, I believe both airlines can carry more passengers between our KLIA and Changi, bringing even greater economic spin offs to KL and Singapore. We should jointly pursue a more liberalized aviation policy to give our airlines flexibility in the expansion of our air links. The emergence of low cost carriers in Asia should also present growth opportunities for the tourism sectors of Malaysia and Singapore.

In 2005, 7.31 million Malaysians visited Singapore and 9.63 million Singaporeans visited Malaysia. Promotional events such as Visit Malaysia and the Great Singapore Sales (GSS) further stimulate tourism arrivals from each other. In 2005, Malaysia was our 4th largest market in terms of the Great Singapore Sales participants, accounting for 10% market share in the GSS. From 2000 to 2005, the number of Malaysian visitor arrivals during the holiday season of November to December grew at a rate of 11% yearly.

Exchange Programs by Schools

Mutual understanding between our two peoples could and should also start with young people and children. In fact, I am happy to note that Singapore’s Raffles Girls’ Secondary and Malaysia’s Tunku Kurshiah College started the ball rolling in July 2005— with friendly sports matches, joint workshops in drama and joint forums for their student leaders.

More student exchange programs involving the pairing of schools from both sides of the causeway will commence in the coming months. A contingent of students from the brass band in St Joseph Institution Singapore came to perform in Catholic High School in Selangor this February. In return, students from Catholic High School in Selangor will be visiting Singapore this August to perform during the National Day Celebration.

B) Business to Business Connection

Now I move on to speak about the business to business connection, a connection that is ever growing and bringing us closer.

Let’s consider some statistics. Malaysia remained Singapore’s top trading partner in 2005, while Singapore remained Malaysia’s top trading partner within ASEAN, and overall second largest trading partner after the US. With total trade for the first 5 months of 2006 already at S$42.7 billion, trade between our two countries is on track to surpass 2005’s figure of S$96.1 billion.

According to MIDA’s statistics, Singapore has the highest number of approved manufacturing investment projects and 3rd highest, in value terms, of manufacturing investments in Malaysia so far this year. In 2005, Singapore’s total investments into Malaysia came up to S$1.3 billion. New projects from Singapore were mainly in electrical & electronics as well as food manufacturing, with more than half of the projects located in Johor. Noteworthy examples of cross-border investments include the recent Telekom Malaysia acquisition of a 30% stake in M1 and Temasek Holdings investment in Southern Bank Berhad.

This growing involvement in each other’s economy does not stop at cross ownership of large corporations, but goes on to numerous SME ventures. For instance, Malaysia’s Secret Recipe have come to Singapore while Singapore-grown brands such as Banyan Tree recently opened a new Angsana Spa in KL, and Osim has become one of the largest healthcare retailers in Malaysia. Companies like Crystal Jade, and Sakae Sushi can be found readily on both sides of the causeway.

The value of the economic ties lies not only in the amount of investments but also in the strength of the linkages formed in the partnerships. Many businesses are already functioning as though there are no borders, with Malaysia and Singapore as one economic space. Major electronic and computer manufacturers such as Dell, HP and Flextronics move components across the Causeway repeatedly, beginning from production to final assembly.

I once met a CEO of a multinational electronics company. He told me that the JB-Singapore combination offers the most competitive location for manufacturing and distribution activities for his company, more so than locations in China. I asked him why. He told me that apart from the presence of a comprehensive range of developed supporting industry, the JB-Spore combined offering had enjoyed great logistical advantage. Despite higher wages, the resulting unit cost of production using JB-Singapore is even lower than other low cost countries including China. This example illustrates the strong value preposition Malaysia and Singapore could offer to MNCs by working closely together. We should never underestimate the combined strength of our economies, in manufacturing and other sectors.

C) Connection within ASEAN

Let me move to the 3rd Connection: the connection within ASEAN. Within ASEAN, the most important economic relationship by far is that between Malaysia and Singapore. Our bilateral trade accounts for almost 70% of total intra-ASEAN trade. ASEAN is one of the key trading partners for both Malaysia and Singapore. ASEAN accounts for 30% of Singapore’s total trade with the world, while Malaysia’s trade with ASEAN was 25.4% of Malaysia’s total trade in 2005.

But further to working within ASEAN, Malaysia and Singapore should look beyond ASEAN and replicate this successful working relationship to support ASEAN, move forward to forge links with its major trading partners. In fact, I believe the rise of China and India, two very huge markets in the making, will pose both challenges and opportunities for ASEAN. If ASEAN increases its degree of integration by further enhancing the ASEAN Free Trade Area, and other frameworks for ASEAN economic integration like the ASEAN Investment Area, ASEAN as a FDI destination could re-assert its attractiveness to the investors. Today’s investors are presented with many choices for committing their investment dollars. An integrated ASEAN, offering MNCs competitive locations to distribute their value chain operations is the best way to ensure ASEAN remains economically relevant.

D) ASEAN and the World

Consider this: the major bilateral trading partners of Malaysia and Singapore are also the key trading partners of ASEAN, such as USA, Japan, the EU and China. Singapore and Malaysia now enjoy mutually beneficial trading relationships with these key trading partners of ASEAN, and should take this opportunity to facilitate and increase ASEAN’s trade and investment flows with these countries.

ASEAN is now at various stages of negotiating FTAs with other countries in northeast Asia. Currently, ASEAN has concluded the Trade in Goods Agreement with China and Korea. Our negotiations with China and Korea on Trade in Services and Investments rules are ongoing.

Meanwhile, FTA negotiations with Australia and New Zealand have intensified. With India and Japan, we had a series of hard negotiations. In our continual engagement of dialogue partners, ASEAN realizes the importance of speaking with a unified voice — as one integrated economic bloc.

All these links will enable ASEAN to thrive as a hub in Asia and a key node in the global economic network. Malaysia and Singapore together, have an important role to make ASEAN more attractive as an investment destination for companies and investors who are keen to tap the vibrancy of a region on the move, and want to diversify their exposure to China and India.

Conclusion

The 21st century is often described as the century for Asia. Based on all the economic parameters we could compute, the physical development and prosperity we could observe across Asia, there are reasons to believe that we are indeed living in an exciting time, an unprecedented era of growth and prosperity.

Geographically, we are happily sandwiched between the east and the west, between a rising China and liberalizing India. ASEAN, situated along the world’s busiest shipping route, has a young population endowed with abundant resources. Our mutual trade and investments would grow much stronger, adding strength and depth to each other’s economy. Asia itself is becoming a very sizable market. Let us seize the opportunities together.

Thank you.