Mr Lim Hng Kiang at the Global Trader Networking Cocktail 2008

opening ADDRESS BY MR lim hng kiang, MINISTER FOR TRADE AND INDUSTRY, AT THE global trader NETWORKING COCKTAIL 2008 ON tUESDAY 20 May 2008, 7.55 PM AT JOHN JACOB BALLROOM, sT REGIS HOTEL 

Distinguished Guests,

Ladies and Gentlemen,

Good evening.

It is my pleasure to join you this evening at the Global Trader Networking Cocktail. Overview of international trading landscape – volatility in global commodities market.

The commodity trading sector has been in the spotlight more frequently recently. Oil prices shot past the US$125 mark earlier in May, while gold and tin prices rose to record highs in recent months. We have also witnessed spikes in food prices, with shortages of key staples such as rice, wheat, corn and soybean.

The reasons for escalating prices are multi-fold, attributed largely to under-investments in production facilities and unpredictable weather patterns, coupled with growing demands from a larger and more affluent global consumer base. Commodities traders are challenged to manage increasingly complex risks and anticipate the potential opportunities.

Asia’s growing importance

In particular, we believe Asia will prove to be the most rewarding, albeit challenging, playing ground for traders. Asia as a region has grown rapidly, spurred on by the power houses of India and China. Aggregate GDP in Asia grew at 8.7% in 2007

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. Despite fears of a global slowdown, Asia is still expected to be able to weather the storm well.Asia will become an even more important node in the international trading arena.

A Vibrant International Trading Sector in Singapore

e is in a unique position to leverage on Asia’s trade growth. With our historical roots in being a free “port of call”, trade continues to be the lifeblood of Singapore. Our external trade is more than 3 times our GDP, reflecting the continued importance of trade to Singapore’s economy.

Offshore trade is a vital component of overall trade and economic growth. In 2007, offshore trade by companies under IE Singapore’s Global Trader Programme, GTP, grew more than 30% to reach over US$465 billion. These companies employed over 7,000 staff and contributed S$7.8 billion worth of total business spending, an increase of 20% from 2006. Much of the spending was in shipping, freight management and storage services, lending further testimony to Singapore’s strengths as a logistics and auxiliary services hub.

This upward trend is expected to continue. From a modest start of 25 companies in 1989, there are currently more than 230 companies under the GTP. Today, we recognise the 30 new companies that have been granted GTP status, as well as the 37 companies that have successfully renewed or upgraded their incentive status under the Programme. We continue to review and enhance the Programme to meet industry needs.

Last year, at the Global Trader Summit, I announced two enhancements to the GTP. First, emissions trading was included to the list of qualifying GTP trades. Second, a special tax rate of 5% was allowed for LNG trading income. I am glad to share that a year on, we are seeing positive response from companies. CNOOC, a subsidiary of China’s leading offshore exploration and production company, has set up a LNG desk in Singapore. PetroSeraya has included carbon credits as one of their qualifying products under the GTP.We look forward to seeing more companies capitalising on these enhancements and adding to the vibrancy of our trading scene.

Continuing efforts to reinforce Singapore’s position as a premier trading hub

While Singapore has been successful thus far, we must continue to strengthen existing infrastructure and build up our capabilities. Let me talk about two newer areas which we have been working on.

Strengthening our risk management capabilities

First, we seek to strengthen our risk management capabilities and infrastructure. Underpinned by strong physical trading, Over-the-Counter (OTC) commodity derivative trades in Singapore have reached US$600 billion annually in the last two years. Our vision is to build an Asian commodity derivatives centre here. The recent acquisition of the Singapore Commodity Exchange (SICOM) by the Singapore Exchange (SGX) boosts the infrastructure for exchange traded derivatives. With Asia's increasing exposure to global commodity activities, it is timely that products and exchanges tailored to the Asian time-zone and specifications are launched in Asia.

Building our human capabilities

Second, we are building the infrastructure to develop sectoral knowledge, capabilities and talent pool. The International Trading Institute (ITI) was set up last year, as a tripartite partnership among IE Singapore, Singapore Management University (SMU) and 16 industry players.

A core component of the ITI is the International Trading Track offered under SMU’s Bachelor of Business Management degree. I am pleased to share that two-thirds of the first batch of graduating students are now working for or have been recruited by trading companies such as Vitol, BP, Shell, Noble, and Louis Dreyfus. One has even taken up the challenge of an overseas posting to Rotterdam to work for Concordia. The ITI will continue to groom fresh talent for the industry; there are more than 90 SMU students who are now enrolled on the trading track.

Besides targeting undergraduates, the ITI also plans to launch executive education courses in the second half of 2008. This will help address the gap in structured training courses, helping new hires and supporting functions quickly gain an understanding of the trading industry. 

Conclusion

We are committed to growing Singapore as a premier international commodities trading hub amidst a rapidly evolving global trading landscape. We will continue to enhance the environment for the international trading industry to thrive.

Once again, may I congratulate all Award recipients of the Global Trader Programme. I wish you a pleasant evening of networking, exchange of ideas and forging of business partnerships. 

[1]http://www.adb.org/Documents/Books/ADO/2008/