MR LIM HNG KIANG AT SINGAPOREAN-GERMAN CHAMBER OF INDUSTRY AND COMMERCE BUSINESS LUNCHEON

​SPEECH BY MR LIM HNG KIANG, MINISTER FOR TRADE AND INDUSTRY (TRADE), AT THE SINGAPOREAN-GERMAN CHAMBER OF INDUSTRY AND COMMERCE BUSINESS LUNCHEON, AT MANDARIN ORIENTAL SINGAPORE, ON FRIDAY, 20 NOV 2015, 1.20PM

Your Excellency, Dr Michael Witter, Ambassador of the Federal Republic of Germany to Singapore,

Mr Mak Swee Wah, Vice President of the Board of Management at the Singaporean-German Chamber of Industry and Commerce (SGC),

SGC Board Members,

Distinguished guests,

Ladies and gentlemen,

Good afternoon.                           

Introduction

1.            It is a pleasure for me to join you for this luncheon. As we approach the end of the year, many of you are curious and expectant about the establishment of the ASEAN Economic Community, or AEC 2015. There is a wide range of sentiments on the progress of the AEC and the challenges faced in the pursuit of greater regional economic integration. Nonetheless, the dominant view is that the ASEAN region will play an increasingly important role in the global economy in the years ahead. And with good reasons.  

2.            According to the International Monetary Fund, the world economy will grow at its slowest pace in 2015 since the global financial crisis. The IMF has trimmed its forecast for global economic growth from the initial 3.5 per cent to the current estimate of 3.1 per cent, with a gradual recovery in the years ahead.

3.            There are various reasons for the current sentiment on the global economy. The slowdown in China and its realignment towards consumption and services compounded pain for countries which export oil and metals. Common longer-term challenges also slowed the potential for growth in many countries. These included lower productivity growth, high public and private debt levels, ageing populations and a hangover from post-crisis investment booms in many emerging economies.

4.            Despite the challenging macroeconomic outlook, the ASEAN economy has remained resilient. ASEAN grew at an average of six per cent[1] compared to the global average of four per cent[2] in the last ten years. ASEAN is expected to sustain this growth momentum, with annual growth projected to average 5.6 per cent from 2015 to 2019[3].

5.            With this growth trend, experts estimate that ASEAN could become the fourth largest single market in the world by 2030[4], after the EU, US, and China. ASEAN’s combined GDP could rise more than fivefold to US$10 trillion by 2030. The prospects attest to the economic potential for this sizeable market of 620 million people.

Progress in the AEC 2015

6.            The AEC 2015 builds on this potential and increases opportunities for businesses in the region by eliminating trade barriers and facilitating more competitive markets. The goal is the realisation of a single market and production base, along with equitable economic development and reduced poverty and socio-economic disparities. In the blueprint, these goals are categorised into four key pillars: (i) A Single Market and Production Base; (ii) A Highly Competitive Economic Region; (iii) A Region of Equitable Economic Development; and (iv) A Region Fully Integrated into the Global Economy.

7.            The wide-ranging commitments made by the ASEAN Member States to realise the AEC will benefit a broad spectrum of communities and businesses. While achievements under each of the four pillars may have some gaps and span across different lengths of time, ASEAN Member States are on track to complete most of the initiatives set out in the AEC Blueprint by the end of 2015.

8.            ASEAN has made the most headway under the first pillar. The liberalisation of trade in goods, services and investment in the region brings us closer to achieving a single ASEAN market and production base. Under the ASEAN Trade in Goods Agreement or ATIGA, the ASEAN-6 economies, namely Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand, have practically eliminated intra-ASEAN import duties, or 99.65 per cent of their tariff lines. The remaining countries are expected to follow suit over the next three years.

9.            Manufacturers and traders of goods in the region are already benefitting from ATIGA, where more affordable materials results in reduced business cost and more price competitive products. In turn, consumers stand to gain from the cheaper prices of final goods.

10.         To complement tariff reduction, ASEAN’s Customs administrations have been simplifying customs procedures so that goods can cross borders quickly and easily. These include measures to harmonise standards, technical regulations and conformity assessment procedures to international practices which minimise duplicative testing of products. This allows businesses to save on administrative costs and get their goods to market faster.

11.         The free flow of trade in services is an important element in the AEC, and is increasingly an agent of growth in ASEAN. ASEAN Member States are committed to progressively removing discriminatory barriers to services from fellow ASEAN countries.

12.         ASEAN has completed the 9th package of commitments, and is currently working on the 10th package under the ASEAN Framework Agreement on Services. To-date, restrictions to cross-border services trade have eased in at least 80 services sub-sectors. These include previously closed areas such as professional services, computer services, e-commerce, construction, telecommunications, logistics, air transport, maritime transport, and tourism. Majority of foreign ownership in many of these areas is also now allowed.

13.         To promote and facilitate investment in the region, ASEAN Member States have committed to international best practices for the treatment of investments and investors, streamlined business procedures and enhanced investment protection through the ASEAN Comprehensive Investment Agreement. Stronger and pro-business investment rules will also help to provide greater transparency, and offer recourse to investors in times of conflict.

14.         ASEAN has also directed efforts towards building the second pillar of the AEC blueprint, which emphasises the creation of a competitive economic region. These efforts are in newer areas for many ASEAN Member States, including competition policy, taxation, infrastructure development, e-commerce, and Intellectual Property Rights. Currently, eight ASEAN Member States, including Singapore, have implemented comprehensive competition laws.

15.         A notable achievement under the second pillar of AEC 2015 is the establishment of the ASEAN Banking Integration Framework or ABIF, to boost financial integration. The ABIF provides a platform for Qualified ASEAN banks to enjoy greater market access and operational flexibility. A seamless regional financial system will support greater trade and investment flows and the creation of a competitive economic ASEAN region. Deeper financial integration will also yield substantial benefits for ASEAN economies, and strengthen resilience to external shocks by helping to deepen and broaden capital markets. However, there are practical limits to the speed at which financial integration can take place. Complex issues such as the harmonisation of regulatory standards, market conduct practices, and conditions of licensing will require more time to address.

16.         ASEAN is proud of the good progress made thus far, notably in the first two pillars of the AEC 2015 blueprint. As of August 2015, ASEAN collectively completed about 93 per cent of high priority measures in the blueprint, and about 80 per cent of all measures. More time and work will be required in post-2015 to complete the rest of the measures.  

The Post-2015 AEC Agenda

17.         However, the 2015 milestone does not mark the end of ASEAN’s integration efforts. ASEAN Member States are determined to continue making improvements to the AEC. A High Level Task Force on ASEAN Economic Integration has commenced work on the AEC Blueprint 2025 to further the AEC progress. This agenda will build on existing work, and focus on cross-border issues that are expected to stretch beyond the 2015 timeline.

18.         This includes the third pillar of equitable economic development. Given the differing levels of developments in the region, the deepening of ASEAN integration must be accompanied by technical and developmental cooperation to bridge the gap.

19.         The facilitation and enhancement of the pace of the development of Small and Medium Enterprises or SMEs is one important measure under the third pillar. When the ASEAN self-certification scheme is implemented by the end of 2016, authorised SMEs can self-certify that their goods meet the ATIGA requirements for preferential treatment. This means that companies in Singapore keen on regional expansion will be able to enjoy a smoother clearance of goods in ASEAN, more efficient development of new markets, and reduced administrative effort. They will also enjoy lower business costs and risks, and fair treatment and protection against unlawful expropriation when conducting business in other ASEAN Member States.

20.         With tariffs already close to zero, ASEAN is now turning its attention to tackling non-tariff barriers, which can range from complex import licensing procedures to ineffective implementation of existing commitments. Trade-restrictive non-tariff barriers are often disguised as non-tariff measures, especially those for health, safety, or security purposes.

21.         As such, these areas still pose problems for many companies, and the potential for discrimination against imported goods is extensive. Removing such barriers will improve trade facilitation and ensure that businesses can operate in a transparent, stable, and predictable environment. Addressing these behind-the-border difficulties however, will be one of the priorities for the AEC 2025 blueprint.

22.         A key deliverable that businesses can look forward to is the ASEAN Single Window which is expected to be in force by the end of 2016. The ASEAN Single Window will expedite customs clearance, reduce transaction time and costs, and make trade seamless through the cross-border electronic exchange of information among ASEAN Member States.  

23.         Other initiatives include the ASEAN Customs Transit System. Once implemented, it will allow traders to make a single, standard, electronic declaration for each transit movement of goods under a single guarantee.  This declaration will be valid in all the ASEAN Member States involved in the transit.

24.         These are all a work in progress. ASEAN Member States are prepared to work together to tackle the challenges ahead. In the longer term, policymakers are taking into account emerging challenges and global mega trends to ensure that ASEAN stays ahead of the curve. This falls under the fourth pillar of the AEC blueprint, which focuses on maintaining coherent approaches to ASEAN’s external economic relations, and adopting international best practices to achieve a region fully integrated with the global economy.

ASEAN’s integration with the global economy

25.         Beyond the ASEAN Economic Community, ASEAN recognises the importance of broader regional integration to plug into the global supply chain and to enhance its economic value proposition.

26.         ASEAN is already well connected to the regional supply chains.  ASEAN has five FTAs with six dialogue partners, namely Australia, China, India, Korea and Japan and New Zealand. A key element of the fourth pillar is to consolidate these five FTAs into a single regional trade agreement under the Regional Economic Cooperation Partnership or RCEP.

27.         The 16-member RCEP covers more than 45% of the global population and more than a third of global GDP.  Negotiations are on-going and Parties remain firmly committed to accelerating negotiations to achieve a high quality RCEP agreement.

28.         The recent conclusion of the 12-member Trans Pacific Partnership (TPP) agreement is noteworthy. Representing 40 per cent of global GDP, it injects new momentum to global trade liberalisation and regional integration efforts. Four ASEAN Member States and three dialogue partners are Parties to the TPP. Both the TPP and RCEP, with their overlapping memberships, are pathways towards achieving the vision of a FTA of the Asia Pacific that will see even greater regional integration.

29.         The European Union has also shown renewed interest to engage ASEAN in the recent years. The EU-Singapore FTA (EUSFTA), concluded in 2012, is the first FTA concluded between an ASEAN Member State and the EU. It is a pathfinder for the EU’s FTAs with other ASEAN member states that will serve as building blocks towards an eventual EU-ASEAN FTA. The EU has since concluded it bilateral FTA with Vietnam and negotiations with Malaysia and Thailand are on-going.

Singapore as a gateway for German businesses to tap on ASEAN’s growth

30.         Singapore’s participation in both the TPP and the RCEP will strengthen its position as a player in the regional supply chain. When the EUSFTA comes into force, it will further enhance Singapore’s position as a competitive gateway for European companies to this dynamic and growing region.

31.         German companies looking to venture into ASEAN will find in Singapore a natural partner. Singapore and Germany celebrate 50 years of excellent diplomatic relations this year. We have a proven track record of fruitful collaborations. Germany’s stock of FDI into ASEAN (€18 billion) has risen over the past decade, and more than half is concentrated in Singapore (€9.8 billion). There are more than 1,400 German companies in Singapore, many of which base their manufacturing and regional headquarters in Singapore for easy access to the dynamic markets in the region. 

32.         The AEC will represent significant opportunities in ASEAN and make ASEAN a more attractive market for German companies. As tariffs come down, exporters of automobiles, electronics, and chemicals can profit from the increased market opportunities in ASEAN. The progressive opening of the services sectors in ASEAN also presents compelling opportunities. German companies eyeing expansion into ASEAN can be assured of the greater stability and predictability in ASEAN Member States’ investment regimes, and the robust mechanism for Investor to State Dispute Settlement.

Conclusion

33.         Deeper economic integration within ASEAN is an ongoing effort. The AEC 2015 is not an end-point. ASEAN Member States will continue to build on the progress achieved. At the ASEAN Summit in Kuala Lumpur this weekend, ASEAN leaders will be announcing the establishment of the AEC 2015 and ASEAN’s commitment to the post-2015 agenda.   

34.         Singapore is committed to deliver on the AEC 2015, and the post-2015 agenda. Whether they are ASEAN-wide or country-specific measures, Singapore has been working hard to complete our implementation as effectively and efficiently as possible.

35.         German companies based in Singapore will be able to benefit from the wide networks of FTAs that Singapore has established with the key markets and economic partners. They can continue to rely on Singapore as the trusted launch pad into ASEAN and the broader Asia region.

36.         We look forward to growing this strong partnership with German companies. I take this opportunity to thank the Singaporean-German Chambers of Industry and Commerce for serving as an important bridge between people and businesses in Germany and Singapore, and we hope to continue working closely together with you to further deepen collaboration.

37.         Thank you.

[1] Source: ASEAN Community Progress Monitoring Report

[2] Source: 2013 World Economic Outlook Database

[3] Source: OECD: “Economic Outlook for Southeast Asia, China and India 2015: strengthening institutional capacity”

[4] Source: ASEAN-US Business Council.