Mr Lee Yi Shyan at the FTA Symposium 2007

Speech BY MR Lee Yi shyan, MINISTER OF STATE FOR TRADE AND INDUSTRY, AT THE FTA SYMPOSIUM 2007, ORCHARD HOTEL, WEDNESDAY 14 MARCH 2007, 9 AM

Distinguished speakers and guests,

Ladies and Gentlemen,

Good morning.

Introduction

1.It is my pleasure to be here today at the FTA Symposium 2007. Singapore is well-connected to the world through our extensive network of FTAs. We have so far concluded 11 FTAs, and are actively negotiating 10 more. In terms of economic output, our 11 FTA partners together account for over 46% of the world’s GDP. They also represent most of Singapore’s major trading partners, accounting for more than 30% of our domestic exports.

FTA Benefits for Singapore-based companies

2.FTAs are superhighways connecting economies and markets. By removing barriers to trade and investment, they create a freer flow of goods, services and people.

3.Singapore-based companies stand to benefit in various ways. The first benefit would be tariff savings, making the export of goods and services from Singapore more cost competitive. Under the ASEAN FTAs, tariff savings can even apply to companies based here but with regional operations. For example, we have a large number of companies that retain their strategic high value-add activities like R&D in Singapore, while sourcing for raw materials and outsourcing labor-intensive production to the other ASEAN signatories. These companies are still eligible for ASEAN FTA benefits.

4.The results have been encouraging so farming 2006 alone, total tariff savings gained by companies from our FTAs amounted to S$470 million. Consider the Comprehensive Economic Co-operation Agreement (or CECA) signed between Singapore and India, the FTA utilization rate stood at 68% in 2006 compared to 61% in 2005.The CECA is the FTA with the highest utilization rate. The second highest is the United States-Singapore FTA. The utilization rate rose from 34% in 2005 to 47% in 2006.The overall utilization rate for our FTAs has increased from 2005 to 2006.But this can be improved further.

5.The second benefit is preferential access to foreign markets. Our companies’ overseas investments can gain preferential access to certain sectors such as the financial and education sectors. They enjoy enhanced Intellectual Property (IP) protection. Electronics and telecommunications products also benefit from lower business costs and faster entry into markets because duplicate testing is avoided.

6.Very often, I hear comments that FTAs tend to benefit only larger-sized companies. According to DP Info’s SME Development Survey 2006, although 82% of SMEs are aware of FTAs, only 11% make use of them.IE Singapore has therefore enhanced its outreach programmes over the past year, benefiting over 3000 companies, up from just 300 in 2005.I hope you would move from awareness to utilizing the FTAs to benefit your company.

7.For companies that are still unsure, I would like to cite the case of Owl International, a local manufacturer of instant beverages. By leveraging on the ASEAN Free Trade Area (AFTA) Common Effective Preferential Tariff or CEPT Scheme, Owl has saved their importers some S$100,000 in tariffs in 2005. This has enhanced Owl's competitive edge. As a result, over the past three years, Owl’s sales of instant coffee, instant tea and instant cereal have grown steadily. I understand that Owl is now exploring opportunities in the growing Middle East market. To many other companies like Owl, the upcoming Gulf Cooperation Council (or GCC)-Singapore FTA would be exciting news.

8.The third benefit is more indirect. Our FTAs add to our business infrastructure, giving us a competitive advantage when attracting foreign companies to form linkages to our economy. Foreign companies stand to benefit from using Singapore as a gateway to explore opportunities in our FTA partner countries. They can form partnerships with Singapore companies to enter third countries, or set up operations here to enjoy similar tariffs savings. This will contribute to our economy and stimulate local enterprise activity.

9.Just recently, IE Singapore promoted our extensive network of FTAs at a Tokyo seminar and received positive response from Japanese companies. In particular, companies were interested in how they can leverage on CECA to expand into the India market.

Importance of industry feedback

10.To ensure that many more companies can take advantage of our FTAs, we will continue efforts to design agreements to meet the needs of our companies.

11.I would like to urge companies to share information such as your production and sourcing patterns, investment preferences and so on with agencies including IE Singapore and EDB. Your participation will be valuable to help them shape the FTAs for the ongoing negotiations, such as with China and the GCC.

Conclusion

12.Singapore has been consistently ranked as one of the freest economies in the world by The Heritage Foundation and The Wall Street Journal. With a web of FTAs in place, Singapore’s role in international trade will be further strengthened. We are well-positioned for the future.

13.I wish all of you a rewarding and enjoyable time at this Symposium.