Mr Lee Yi Shyan at the Latin Asia Business Forum

OPENING ADDRESS BY MINISTER OF STATE FOR TRADE & INDUSTRY LEE YI SHYAN AT THE LATIN ASIA BUSINESS FORUM, 14 SEP 2006, THE REGENT HOTEL

Your Excellencies

Distinguished speakers and guests

Ladies and Gentlemen

Good Morning.

It gives me great pleasure to join all of you this morning at the opening of the Latin Asia Business Forum 2006. I would like to extend a very warm welcome to all overseas speakers and delegates, from both Asia and Latin America, who have travelled specially to be with us today.

The Shift in Global Economic Focus

North America and other G7 economies are familiar markets for Asian companies, given their large size and purchasing power. In the last decade, we have witnessed a shift in the global economic focus from these traditional markets, towards emerging markets such as China, India and the Middle East. I think we are all well aware of these economies’ growth stories. What we are less aware of is the Latin American growth story and the wealth of opportunities this presents. The Latin Asia Business Forum – whose theme this year is ‘New Opportunities and Strategies for Growth’ – aims to rectify this situation. By bringing together two dynamic regions – Latin America and Asia – this Business Forum hopes to unleash the untapped potential in our economic relationship.

The Latin American region has posted strong growth in recent years and its growth prospects continue to look bright. The United Nations Economic Commission for Latin America and the Caribbean expects growth of 4.6% this year for the region. At an average of 6.3% last year, inflation is at one of the lowest rates since the 1960s. Foreign debt levels are down as Latin American economies have capitalized on their strong growth to reduce their debt. According to the Inter-American Development Bank, public debt has fallen from 72% of GDP in 2002, to 53% in 2005. In fact, the Bank has calculated that the average fiscal deficit in the region has shrunk from 3.3% of GDP in 2002, to 1.7% last year. All these changes have inspired a boom in Latin American assets. Regional stock markets have enjoyed three bumper years, and the risk premiums paid by Latin American governments on their bonds have fallen to record lows.

Bilateral Trade between Asia and Latin America

Due to factors such as distance, lack of familiarity and lack of presence, trade flows between Asia and Latin America have traditionally been low. But we are glad to note that this is gradually changing. Interactions and links between our two regions – both at the political and economic levels – are growing. From 2002 to 2003, bilateral merchandise trade between our two regions grew by 17%.From 2003 to 2004, the growth rate more than doubled to hit 38%.

Meanwhile, a number of Latin American and Asian countries have launched bilateral FTAs. The Korea-Chile FTA – which came into force in April 2004 – and the Japan-Mexico FTA – which came into force last year – are two such examples. Singapore has also launched FTAs with various Latin American countries. We have the Panama-Singapore FTA, which came into force earlier this year. The Trans-Pacific Strategic Economic Partnership – which we informally term the “P4 FTA” – is a plurilateral agreement we have with Chile, Brunei and New Zealand. Singapore is also negotiating an FTA with Peru.

Singapore’s Forays into Latin America

Singapore has leveraged on the growth of trade linkages between Latin America and Asia to increase our investments in Latin America. It may surprise you to learn that we are, after Japan, the 2nd largest Asian foreign direct investor in both Mexico and Brazil.

Our earlier forays into the region were spearheaded by shipyards Keppel FELS and SembCorp Marine in the 1990s, in the offshore and marine business. Today these companies employ over 20 000 workers in Brazil. The creation of NAFTA in the late 1990s attracted contract manufacturers such as Amtek Engineering and Flextronics to locate in Mexico, to be close to their Original Equipment Manufacturer clients in the United States. From 2000 onwards, the commodities and agro-processing business became a new target market for companies like Petra Foods, Olam, RGM and Noble.

Today, Singapore companies are moving into the service industries in Latin America. For example, Raffles Education has set up a private design school in Sao Paolo. Inter-Roller Engineering and ST Aerospace have succeeded in providing services to the airport logistics and airline maintenance industries, respectively. Banyan Tree is slated to manage two world-class resorts in Mexico in 2007.

Singapore’s decade-long engagement in Latin America is a testament to the diverse opportunities that exist for both large and smaller companies. Based on the findings of IE Singapore’s recent survey of Singapore companies with business operations in Latin America, we can expect to see more companies moving into the Latin American market. In the survey, 86%of respondents reported that their investments in Latin America have been profitable as of their last financial year. Consequently, one-third of the companies said that they are eager to further their expansion in the region, with some planning to make capital investments of up to US$25 million, in the near future.

Latin American Companies in Asia

Trade and investment flows are never just one way. Just as we are keen to see more companies from Asia tap on the varied opportunities in the Latin American market, we would also welcome a greater Latin American presence in Asia. Latin American companies can look forward to expanding into a new Asia, a region that is powered by the booming markets of China, India and Southeast Asia. Major conglomerates such as Cemex, Embraer, PDVSA, and Codelco are already present and doing business in Asia. We are also pleased to note that in August this year, one of Latin America’s largest corporations, Petrobras, officially opened their Asia-Pacific trading hub in Singapore.

Next Steps

Having touched on the economic opportunities available in Latin America and Asia, the next step is to tackle the question of how to create success in these markets.

An important factor to being successful in overseas markets is to work with the right local partner. Whether it is through a strategic alliance, or an actual joint venture, Singapore-based companies seeking to do business in Latin America can benefit by finding a strong local partner who understands local business norms and has the necessary network and contacts to facilitate entry into the market. A good example is the collaboration between Singapore’s eSys Technologies – one of the world’s largest hard disk drive distributors – and Telmex, Mexico’s leading telecommunications company. Under their collaborative arrangement, Telmex offered eSys’ PCs as part of a promotion for consumers subscribing to Telmex’s broadband internet services. This arrangement enabled sSys to supply more than 150,000 PCs to Mexican consumers.IE Singapore’s overseas centers in Mexico and Brazil not only provide assistance in terms of timely market intelligence and on-the-ground support, but also play a role in linking up companies such as eSys and Telmex. Of course, we also hope that today’s Forum will be a catalyst to spark more of these fruitful relationships.

For Singapore-based companies keen to move into Latin America, another strategy they could consider is banding together to explore the market, so as to mitigate risks and enhance group learning. The iPartners scheme from IE Singapore can provide the necessary support and advisory framework for such consortia.

Further down the line, we can also explore the possibility of companies from both regions partnering together to target key projects in a third country. Working together in this way would allow our companies to combine their resources, know-how and talent, complement their product offerings and achieve economies of scale. It will also shorten their learning curve and sharpen their competitiveness thus maximizing the chances of success.

In August this year, IE Singapore and the Japan External Trade Organization (JETRO) jointly organized a business mission consisting of 17 participants from Singapore and Japanese companies to visit five cities in India, with the aim of exploring opportunities for collaboration between Singapore and Japanese companies in India’s infrastructure and real estate sectors. A similar initiative to explore joint opportunities between Latin American and Singapore companies could also be organized. I would like to invite Latin American groups to partner with Singapore consortiums for infrastructure projects in markets such as Vietnam, India and China. Similarly, Singapore-based companies working with Latin American partners need not only limit themselves to the country of their partner’s base or origin. They could work with their partner to target other projects in the Latin American region.

Conclusion

These are just some examples of the ways in which businesses in our two regions can work together. The Latin Asia Business Forum has always had the objective of providing a platform to build partnerships between Asian and Latin American companies. I hope that through this event, we can begin to identify mutual areas of opportunity and collaboration, and the ways through which we can work together to tap into these opportunities. Last but not least, I hope that you forge new and lasting friendships with each other and use this as a first step towards closer cooperation in the near future.

Amigos Para Siempre.