Mr Lim Hng Kiang at the Global Trader Networking Dinner

SPEECH BY MR LIM HNG KIANG, MINISTER FOR TRADE AND INDUSTRY AT THE GLOBAL TRADER NETWORKING DINNER ON TUESDAY, 23 MAY 2006, 7 PM, AT THE FOUR SEASONS BALLROOM (2ND LEVEL), FOUR SEASONS HOTEL

Distinguished Guests

Ladies and Gentlemen

A very good evening to you all.I am very pleased to be here with you this evening at the Global Trader Networking Dinner.

CHANGING PROFILE OF INTERNATIONAL TRADING COMPANIES IN SINGAPORE

Today’s international trader is a partner to producers and end-users, adding value by managing global supply chains, arranging finance and managing risks with increasingly sophisticated instruments.This has given rise to a wide spectrum of trading models.Major producers such as Shell, BP, Baosteel and Cargill have established trading arms as strategic business units to secure supplies and distribution channels, in addition to conducting 3rd party trades.Others started as international traders before venturing into upstream and downstream activities, like home-grown oil trader Concord Energy who made its first foray into oil processing with a US$200 million condensate splitter on JurongIsland.We are encouraged to see that these companies have deepened their roots here.

Singapore has long been known as an important “port of call” for traders, especially those dealing between the eastern and the western time zones. From modest beginnings, the trading community under our Global Trader Programme (GTP) has multiplied into a pool of close to 190 companies.The oil, agri-commodities and metals trading clusters continue to grow from strength to strength.For our metals cluster, we have seen new entrants.One of them is Wanxiang Resources, the metals and oil trading arm of the Wanxiang Group, one of China’s largest private enterprises.

At the same time, we are encouraged to see other trading clusters such as industrial and electronic products making their presence felt in Singapore.As an example, D-Link International, the Singapore subsidiary of D-Link Corporation, one of the world’s leading providers of networking equipment, was recently awarded GTP status. Caterpillar, the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines, has committed under its GTP award to set up additional operations in Singapore, including an expanded regional information technology presence for the Asia Pacific region.Hailing from a diversity of geographies, the trading community here is shaping into a true microcosm of the globalised economy.

SINGAPORE -- THE COMMODITIES TRADING HUB

Today, we are acknowledged as the third largest oil trading hub in the world and Asia’s premier oil trading hub.We are also the world’s number one bunkering port, crossing the 25 million tonnes mark for the first time last year[1].Given the historical significance of rubber from Southeast Asia, Singapore is widely recognized as the region’s rubber trading centre and pricing centre for international transactions.Building on these existing strengths, we will further entrench Singapore as the preferred hub for international commodities trading.

RIDING THE COMMODITIES WAVE

The enthusiasm for commodities which started in the last few years is largely attributable to the rise of two Asian giants, China and India.Commodity prices for energy, metals and industrial products have surged on the backs of strong demand and emerging supply constraints since 2002.Agri-commodities are currently seen as being significantly undervalued, and are forecasted to follow this bullish trend[2]. China’s appetite for commodities to fuel its industralisation continues to be a decisive factor in the global commodities market.While India is estimated to be 5 to 20 years behind China in per capita use of commodities such as aluminium, copper and steel[3], the country is shaping up as a potential key driver of global commodities.The outlook for most commodities markets remains sound.

VISION FOR OFFSHORE TRADING

Our physical offshore trading volume exceeded an impressive US$200 billion last year, roughly equivalent to over 40% of Singapore’s total direct external trade[4].IE Singapore aims to grow this offshore trading volume by three times, by year 2015.This is expected to generate incremental value-add to our economy by more than S$6 billion.

To realize this, IE Singapore will be tapping on new market opportunities such as in commodities, as well as innovative ways to entrench Singapore as the premier global trade hub.Let me now touch briefly on a few of the upcoming initiatives for the international trading sector.

Continuing Efforts to Reinforce Singapore’s Position as THE Premier Trade Hub

I Entrenching our Physical Trading Activities

Singapore will continue to enhance and expand infrastructure to facilitate and complement physical trading activities.One such key project announced last month is the Jurong Rock Cavern, an underground storage facility.With the additional possibility of integration with aboveground storage, the cavern will allow for better use of the scarce land and storage capacity on JurongIsland. JTC Corporation will begin work later this year and the first cavern is expected to be ready in 2009.Together with a number of private sector players which are also embarking on oil and petrochemical storage projects, the Jurong Rock Cavern will not only support the petroleum and petrochemical industries on JurongIsland, but also provide a strong boost to Singapore’s status as an oil and petrochemical trading hub.

II Extending beyond the Physical Marketplace

Secondly, beyond the physical marketplace, efforts to enhance the trade-supporting platforms are gaining momentum in tandem with the increasing sophistication of the industry.With the support of IE Singapore and MPA, Singapore Exchange (SGX) has just recently announced a new over-the-counter (OTC) clearing facility to serve the growth of commodity derivatives in Asia.Named as SGX AsiaClear[5], it will initially cover energy and freight derivatives, and will help bolster Singapore's position as a ship broking and oil trading centre.

The GTP was expanded to include freight derivatives under the list of approved products since May last year.The GTP was also enhanced recently, so that companies no longer need to show that their derivative trades are incidental to the physical trades.Effective from Year of Assessment 2007[6], this would lower the compliance costs for companies and allow them greater operational flexibility in using derivatives in their hedging strategies.

We are also encouraging the launch of new commodity futures contracts in Singapore, as part of efforts to create a more vibrant derivatives trading market here.SGX has heeded this call, with its joint venture with the Chicago Board of Trade (CBOT), to form a new commodities exchange, the Joint Asian Derivatives Exchange (JADE) Pte Ltd.

III Encouraging Emerging Trading Sectors – Emissions Trading

Thirdly, we will continue to foster an environment conducive for Singapore-based traders to take on new opportunities and test-bed new models for trading.One such example is trade in emission credits.According to the United Nations Framework Convention on Climate Change (UNFCC), by 2050 Asia will be expected to be major contributor of worldwide emissions[7].Under the Kyoto Protocol, there will be opportunities for Singapore-based traders to aggregate and finance Clean Development Mechanism (CDM) projects in Asia, and transfer the emission credits to companies in Annex 1 countries.

This also provides a plethora of overseas opportunities for Singapore-based companies as the focus in the coming years will be on Asia.The Asia Carbon Group has successfully facilitated forward trades of Carbon Emission Reduction (CERs) credits, amounting to 12 million Euros.The Asia Carbon Group which launched the world’s first CDM-focused exchange, is also the anchor company for an iPartners consortium supported by IE Singapore.We welcome the GTP companies to explore new opportunities with the consortium.

IV Enhancing the Operating Environment – Talent Development

Last but not least, we will enhance access to trading talent, which is a key enabler.In collaboration with IE Singapore, SingaporeManagementUniversity will launch a new International Trading Track under SMU’s existing Bachelor of Business Management degree programme in September this year.This is a first for Singapore where a trading-focused curriculum has been incorporated at the undergraduate level.

The International Trading Track will equip undergraduates with specialized knowledge and training in critical aspects of international trade including risk management, shipping economics, logistics and trade financing.The programme will also provide opportunities to gain hands-on experience through internships with an international trading firm, commodity brokerage firm or trade financing bank.Students can also participate in business study missions to major trading centres. Through this programme, we aim to raise the profile of trading as a profession of choice amongst our undergraduates, ignite their interest in a career in trading and ultimately grow our local pool of trading talent to complement trading talent from overseas.

CONCLUSION

As the international trading industry continues to evolve, the inter-personal relationships remain at the heart of the business.Even as we feel that geographical distances are shrinking in a globalised economy, there is an increasing need for gateways between countries and cultures.Singapore will continue to play a pivotal role in this arena.Tonight, I encourage every guest here to make the best of the networking opportunities, and I look forward to speaking with many of you.Thank you.

[1]Maritime Port Authority press release, 12 Jan 2006

[2]Global Markets Research, Deutsche Bank, 7 Apr 2006

[3]Trade and Development Report 2005, UNCTAD

[4]Singapore’s 2005 direct external trade was S$715.7 billion (US$429.5 billion)

[5]SGX has officially launched SGX AsiaClear on 16 May 2006

[6]Budget Statement 2006, Ministry of Finance

[7] According to UNFCC, the aggregate emissions from OECD countries formed over 47% of the total worldwide emissions in 1990 whilst Asia contributed about 19%.However by 2050, a reversal in terms of percentage contribution can be expected.