Mr Lim Hng Kiang at the Global Trader Summit, 16 May 2011

Speech by Mr Lim Hng Kiang, Minister for Trade and Industry at the Global Trader Summit, Monday, 16 May 2011, 9.10am at Marina Bay Sands Convention Centre

Good morning and welcome all to the 2011 Global Traders’ Summit. This year we are meeting under much improved circumstances, compared to 2 to 3 years ago.

2. The global economy has recovered from the global financial crisis but we are mindful that it is still susceptible to a number of downside risks. Nevertheless, the Asia growth story remains intact.

a. Consumer demand from the Asian middle class remains strong.

i. In 2010, Asia accounted for about a third of total global consumption. We expect this share to continue to grow.
ii. In China for example, growth in retail sales of consumer electronics have been averaging above 15% per annum for the past 4 years. Nomura estimates that, by 2014, total value of all retail sales in China will surpass the United States 

b. Asian governments continue to spend billions of dollars on infrastructure, improving roads, ports, telecommunications and power plants. This presents attractive opportunities for companies. It will also set the stage for sustained economic growth in the future.  

i. Asian corporates are also growing very strongly. They are getting bigger, and are better managed than ever before.  

c. Asia as a region therefore remains very promising, and will continue to see strong growth in the medium term.  

3. Singapore is well positioned to ride on Asia’s growth.   

a. Companies around the world continue to value our physical and cultural affinities to Asia and the rest of the world.  

i. More than 4,000 MNCs are headquartered here. Some are global headquarters, some regional ones.

b. But it’s not just “traditional” global trading MNCs that find Singapore attractive. Our business eco-system is getting more diverse and resilient.

i. In recent years, more regional players and smaller family-owned trading houses have come to Singapore as well, to grow their global business.

ii. These companies represent a range of sectors, adding to the diversity of our trading marketplace.

(1) Agrohub, a sister company of Indonesian cocoa processor BT Cocoa, was established in Singapore to market the company’s cocoa products to 50 countries in the world. Singapore was chosen due to the ease and lower cost of obtaining financing.

(2) Petron Corporation, the largest oil company in the Philippines, also set up a base in Singapore last year. Its Singapore office is the only trading hub of Petron Corporation outside of the Philippines.

c. Growth-oriented companies from all over Asia also want to come here, to use Singapore as a base to expand beyond their home markets.

i. Since the mid-2000s, the number of Chinese companies here has doubled (about 3,500 today).

ii. The number of Indian companies has tripled (about 4,500 today).

d. Our own companies here in Singapore have taken advantage of Singapore’s strengths and advantages, and have grown their presence in Asia.

i. The flow of outward investment to Asia has increased strongly.

ii. Between 2006 and 2009, the stock of our investment in Asia grew from approximately S$120 billion to S$190 billion.

iii. Trading companies have also increased their investments in Asia from their base in Singapore. For instance, Wilmar International Limited has made significant investments in plantations and manufacturing plants in Indonesia, Malaysia, Vietnam, China and India totalling more than US$8 billion over the years, which includes approximately US$1 billion invested last year (2010).

e. The presence of all these companies here in Singapore – large and small, foreign and local – enhances the vibrancy and depth of our commodities trading community

4. As we look towards the future, Singapore will continue to grow and entrench our trading sector. We will do so by strengthening our fundamental attributes that have brought us to where we are today.

a. We will continue to maintain a sound, stable, predictable regulatory environment for business, one that strikes a balance between managing systemic risks and providing a business-friendly environment.

i. Our aim is to provide transparency and certainty to companies so companies can plan ahead and ride out the cycles in a safe environment.

ii. We believe that market principles are necessary to help governments work better. But good governance is also necessary to help markets work more effectively.

iii. We will maintain a light touch, free-market orientation in our regulatory approach. This means that we will regulate in keeping with best practices and complying with international standards of governance.

iv. Singapore will continue to listen to the needs of the business community, and will work with trade association and various chambers to find sensible, practical solutions to the challenges going forward.

b. We remain committed to free trade. Our network of FTAs has served us well.

i. Our ongoing FTA negotiations with the EU and 9-member Trans-Pacific Partnership (TPP) are progressing well since negotiations started last year.

(1) With the EU – the largest market for our exports – we are at an advanced stage of our negotiations and it is possible that we could conclude the negotiations later this year.

(2) The TPP has also moved along well. With Malaysia joining the negotiations last year, the TPP has truly become a partnership spanning both sides of the Pacific.

(3) Both FTAs will maximise opportunities for companies while catering to 21st century business realities like supply chain fragmentation

ii. We are confident that these FTAs, when concluded, will deepen Singapore’s position as the leading centre of business in Asia.

c. We will grow the sectors of the economy that provide the “human infrastructure” and talent needed for the rest of the economy.

i. For example, we recognise that the sophistication of the existing financial infrastructure is an important consideration for global traders when they decide where to base their trading operations. Our strong financial infrastructure therefore plays a key role in supporting the growth of the trading sector.

ii. Risk management is integral to trading companies, particularly because the global commodity markets are now increasingly volatile.

(1) Singapore offers efficient access to global futures trading platforms and clearing houses.

(2) At the same time, we have developed Asian-centric contracts on Singapore-based trading and clearing platforms in response to the high demand for such contracts due to Asia’s increasing prominence as a major producer and consumer of key commodities.

iii. Singapore has also established itself as one of the key insurance hubs in Asia, with a diverse mix of insurance players offering sophisticated risk management solutions.

(1) Currently, there are more than 200 insurance players in Singapore, well supported by a vibrant network of ancillary service providers such as brokers, actuaries, lawyers and others.

iv. The availability of legal services such as arbitration services enhances our value proposition for traders.

(1) Increasingly, Singapore is becoming the choice venue for settling commercial disputes out of court, together with New York, London and Paris.

d. These three pillars – namely, ensuring an open and free external environment, maintaining a stable, business-friendly domestic environment, and growing key “enabling” sectors as financial and legal services – will help us in our progress towards becoming a global trading hub.

i. Today we have a strong community of trading companies in energy & chemicals, metals & minerals, and agri-commodities.

ii. Trading accounts for nearly one-sixth of Singapore’s GDP.

iii. Trading is therefore a key element of services exports. In 2009, exports of trade-related services accounted for about a quarter of our services exports, or S$32.5 billion.

e. Singapore offers a unique value proposition that combines the strengths of other trading hubs such as London and Switzerland.

i. We all know that London is the nerve centre for derivatives trading and risk management. Singapore is working to achieve the same, having seen some success in developing an active OTC market and Asian-centric trading solutions.

ii. On the other hand, Switzerland serves as the seat of global HQs, where traders, structured financing, risk and freight management are located. Singapore has had some success in attracting traders, corporate support functions, freight and risk management, as well as insurance and arbitration activities.

iii. Strategically located between the producers and consumers of commodities such as coal, rubber, palm oil and iron ore, Singapore is an ideal location for companies to base their commodities trading activities. We have also managed to attract commodity banks, such as BNP Paribas, ABN Amro, Rabobank and Credit Agricole to set up significant operations in Singapore.

f. Singapore is therefore committed to growing the trading sector, to anchor more companies and trading-related activities here.

i. This sector needs good people. Hence, the government has put in efforts to groom the talent pool for trading.

ii. In 2007, Singapore Management University (SMU), IE Singapore and leading industry players formed a trading institute called International Trading Institute (ITI) @ SMU. ITI has a specialist focus on international trading.

(1) ITI delivers training and education in international trading at the undergraduate as well as professional levels, and conducts applied research in international trading with an Asian flavour.

g. ITI also provides consultancy services for trading and related organisations in Singapore and the region.

h. I hope to see more of such collaborations between industry and the government in the future.

 5. Ladies and Gentlemen, Singapore’s trading sector would not have developed without the contribution of our trading community. The growth of the trading sector in Singapore therefore depends on you.

a. I encourage trading companies to work with us to build up this sector.

b. Give us your ideas and feedback.

c. Work with us to set up good rules and grow the pool of talent here.

d. And help us anchor regional trade flows in key clusters.

e. Together we can make sure Singapore remains the best place in the world for your work, and make steady progress towards becoming a global trading hub.

f. Thank you.