Mr Lim Hng Kiang at the Coface Country Risk Conference 2010, 29 June 2010

WELCOME ADDRESS BY MR LIM HNG KIANG, MINISTER FOR TRADE AND INDUSTRY AT THE COFACE COUNTRY RISK CONFERENCE 2010 ON TUESDAY, 29 JUNE 2010, 0905 HRS AT THE SHANGRI-LA HOTEL, SINGAPORE

His Excellency Olivier Caron, French Ambassador to Singapore

Mr Jerome Cazes, Managing Director, Coface Holding

Mr Jean-Claude Speitel, Managing Director for Asia, Coface Holding

Distinguished Guests,

Ladies and Gentlemen,

Good morning.

Introduction

I am pleased to join you today for the Coface Country Risk Conference 2010.

The Global Economic Recovery

Less than a year ago, the world was experiencing a global recession. In recent months though, with the support of expansionary fiscal and monetary policies in the major economies, we have seen a global economic recovery taking place. Industrial production has recovered and global trade flows have rebounded. Economic growth has turned positive in all major economies.

Barring further systemic shocks, growth is likely to continue in the second half of 2010. One discernable trend in this global upturn is that the economic recovery in Asia is outpacing the rest of the world. By the end of 2009, gross domestic product in most of Asia, including economies most affected by the crisis, was close to pre-crisis levels.

For the advanced economies, the pace of growth remains uneven even as recovery firms up. The US is leading the G3 recovery. Private demand has stabilized with the support of fiscal stimulus measures. The labor market has also shown further signs of stabilization. This has supported consumer spending, while lower macroeconomic uncertainty has supported investment. For the rest of the year, the US economy is expected to continue to recover. It will however be at a modest pace, as private demand recovers from the low levels seen in 2009.

Sovereign Debt Concerns Pose Risks To The Global Recovery

Even as the global economic recovery gets underway, there remain uncertainties that could derail the recovery process. A key downside risk is sovereign debt concerns in the EU. The recent forceful policy intervention by the EU and the IMF has helped to inject much needed confidence and stability into the financial markets. However, it is important for Greece and other fragile economies to ultimately strengthen their public finances and implement the necessary structural reforms. In the short-run though, the implementation of fiscal austerity measures could further slow the recovery in domestic demand in the Eurozone, which is already sluggish.

Stronger Recovery In Asia

Here in Asia, our strong recovery has been underpinned by four key factors. First, forceful fiscal stimulus measures have provided a boost to domestic demand, and contributed significantly to investment and consumption growth. The second key factor is abundant liquidity, created by the loosening of monetary policies and capital inflows into the region, bolstering asset markets as well as consumer and business spending. Another key factor is the adjustments made globally in the inventory cycle which have provided strong support for the recovery of industrial production. Lastly, a strong resumption in global and regional trade flows has benefitted exporters in the region.

Several of these factors can be attributed to China, which has been a key source of demand for the region during the downturn. In particular, its demand for consumer and business goods rose continuously throughout the financial crisis. This has been bolstered by growth in household income and an expansion in government subsidies for the purchase of household electrical products. Corporate IT spending has also increased in tandem with the continued growth of new businesses in China. This has positive spill-overs for export-oriented economies in the region.

The region also stands to benefit further from closer economic ties. The recently launched China-ASEAN Free Trade Area (CAFTA) agreement holds the potential to greatly accelerate intra-regional trade for China and the ASEAN members. The China-ASEAN FTA covers a population of 1.9 billion with a combined GDP of US$6 trillion. Many ASEAN industries will benefit with increased market access in China. The outlook for Asia’s growth therefore remains positive.

Singapore - Key Business Hub In Asia

Within Asia, Singapore was one of the economies that was hit the hardest by the global downturn. However, along with the other Asian economies, we have proven to be resilient. The Singapore economy has rebounded strongly and we expect to grow by 7 to 9 per cent this year. As part of the Asian growth story, we seek to further strengthen our position as a key business hub in the region. Over 7000 MNCs and more a third of Fortune 500 corporations have substantial headquartered activities in Singapore. Likewise emerging Asian MNCs have also established bases in Singapore. Our key enabling traits are our strategic location, extensive connectivity, comprehensive logistical facilities, pro-business environment, and robust financial sector. For the third consecutive year, the World Bank has ranked us as the easiest place in the world to do business[1].

Our plans to be a major hub for commodity derivatives trading and risk management are also on track. We are currently Asia’s leading OTC commodity derivatives trading hub, accounting for more than 50 per cent of Asian volumes. We are also a leading insurance and reinsurance center within Asia. As trade activities grow globally and in the region, there will be a corresponding demand for risk management solutions. A vibrant insurance marketplace will be able to respond to these needs. Asia alone will require almost US$8 trillion in infrastructure investments over the next 10 years. Singapore can play a key role in providing political risk insurance to companies engaged in cross border investments in the region. We have therefore made efforts to boost capacity and attract expertise in the underwriting of specialized risks, including areas such as trade credit and political risks insurance. And we have seen a number of major global trade and political risk insurers choosing to set up operations in Singapore.

Coface was one of the first to establish a presence in Singapore. It started out with a joint venture in 1993 with the Export Credit Insurance Corporation of Singapore (ECICS). It has since located its regional reinsurance platform in Singapore to support its many local credit insurance partnerships. I understand that Coface concentrates in Singapore, reinsurance revenues from markets in the region such as Malaysia, Thailand, Vietnam, India and Indonesia.

There have also been successful collaborative efforts between Coface and the Singapore Government. In 2004, Coface agreed to become the lead underwriter when the Singapore government created LIS 2 to widen the underwriting support needed for its pioneering Loan Insurance Scheme. LIS 2 grew to become LIS 3 in 2007 and Coface continued its support as lead underwriter to the scheme. The scheme has been very successful. The number of participating financial institutions has grown to include nine, and the amount of insured loans also increased substantially.

Conclusion

Much is said about Asian and other emerging markets being the engine of growth for the world economy in the next few decades. While there is no doubt that these markets will assume greater importance in the coming years, the necessity of measuring and managing the trade risks associated with these markets will assume a growing importance for both corporations and financial institutions. This year marks the first time that Coface is holding the conference in Singapore. We look forward to hosting more of such conferences and providing a platform for fruitful discussions and exchanges of ideas amongst key industry professionals. On this note, I wish you all a successful conference and to our overseas speakers and delegates, a pleasant stay in Singapore.

Thank you.

[1]World Bank’s “Doing Business 2009 Report