Mr S Iswaran at the 20th Annual (2007) Singapore 1000 & SME 500 Awards

SPEECH BY MR S ISWARAN, MINISTER OF STATE FOR TRADE AND INDUSTRY AT THE 20th ANNUAL (2007) SINGAPORE 1000 & SME 500 AWARDS, AT THE GRAND BALLROOM, THE RITZ-CARLTON MILLENIA SINGAPORE, FRIDAY, 19th JANUARY 2007

Mr Lee Keen Whye, Chairman, DP Information Group,

Ladies and Gentlemen,

Good Evening

It is my pleasure and privilege to join you this evening for the Singapore 1000 and SME 500 awards ceremony

Introduction

This event brings together Singapore’s business community to celebrate the achievements of its movers and shakers.While the Award winners deserve and will be accorded special attention tonight, I would also like to, on a more general note, acknowledge the achievements of all the companies on this year’s Singapore 1000 and SME 500 list.

It is noteworthy that for the first time since the inception of these awards, the total revenue of the Singapore 1000 and SME 500 companies has exceeded one trillion dollars, with a combined profit of 73 billion dollars.Together, these companies employ some one and a half million people, or two-thirds of our labour force.Their contribution to the Singapore economy is significant and self-evident.

Global Growth

This awards ceremony is being held against the backdrop of a robust global economy.2006 was a good year and global economic growth in 2007 is expected to exceed 4%.The rapid expansion of Asia’s economies is a key contributor to this growth.(Asia’s economies grew by 7.2% in 2006 and are forecasted to expand by 7.0% in 2007.)For example, the burgeoning domestic demand of the growing middle class in China and India, is fuelling their respective economic growth rates of 10% and 8%.

Closer to home, ASEAN economies grew by 5.5% in 2006. This steady growth is expected to continue in 2007 at5.7%.The Middle Eastern economies are also making significant strides with large scale internal development programs, exemplified by the spectacular new urban centers in Dubai, Doha, and Bahrain.The IMF estimates that the Middle East region will grow by 5.8% in 2007.

Market Integration

This positive economic outlook can be attributed, at least in part, to rapid economic globalization. With growing international trade and global foreign direct investments, markets are becoming increasingly integrated.

The World Bank estimates that global trade volume grew by 9.7% in 2006, surpassing the 7.7% growth of 2005. The rise in the number of regional and bilateral Free Trade Agreements has further eroded trade barriers, spurring the movement of goods, services and capital across international borders.

Asia’s trade performance over the last two decades has been remarkable.The Asian Development Bank's flagship annual economic publication, the Asian Development Outlook, indicated that the exports of Asia’s developing economies’ expanded almost 10-fold between 1984 to 2004.This increase was attributed to the robust performance of East Asia, and the steady expansion in South and Southeast Asia.

Global foreign direct investment (or FDI) continued to surge in 2006.According to projections by the UN trade and development agency, global FDI grew by 34% over the previous year to US$1.2 trillion. FDI inflows to South, East and South-East Asia, and Oceania maintained their upward trend in 2006, reaching a new high of $US187 billion, an increase of 13% over 2005.

Vibrant and Growing M&A activities in Asia

Global economic growth and market integration offers a rich vein of opportunities for businesses to mine.Companies need scale and international reach to capitalise on such opportunities.In response, companies have adopted a range of corporate strategies to expand their businesses internationally.This has ranged from organic growth to joint ventures, strategic alliances to Mergers and Acquisitions (or M&A), each offering its own balance between speed of market penetration, execution risk and operational challenge.

Cross-border M&As, in particular, have been growing in pace as the preferred strategy of businesses keen to achieve their desired scale and international reach in decisive moves.Globally, 2006 was the biggest year for mergers and acquisitions in history, surpassing the boom of 2000 which preceded the dotcom crash. Earlier this month, Thomson’s Financial reported that global M&A hit a record US$3.8 trillion in 2006, a 41% increase from the $2.7 trillion reported in 2005.

In Asia too, cross-border M&A activities are on the rise.This is due to both the growth ambitions of Asian and multinational corporations, as well as the surge inprivate equity interest in the region, attracting many large private equity houses from the US and Europe to establish footholds in key markets.This latter group of new competitive entrants are raising the bar, both in terms of transaction sophistication and deal pricing.Operating companies must have the requisite financial skills and street smarts if they are to compete or collaborate with these formidable players.

In a survey conducted by PricewaterhouseCoopers last year, 68% of the respondents, comprising 130 senior executives from Asia’s financial services industry, predicted that their organizations would undergo significant M&A activity to expand in Asia in the next five years. This suggests that cross-border M&As in Asia will continue to gather momentum in the years ahead.In East Asia, for example, Thomson Financial reported an 82% increase in cross border M&A transaction volume from US$46 billion in 2004 to US$84 billion 2005.

Merger Provision

As a major financial centre in a region experiencing vibrant growth, Singapore’s regulatory environment must be ready for this challenge.Today, M&As are an essential plank of any corporate strategy, yielding significant business efficiencies.While not all M&As have anti-competitive effects, some may substantially lessen competition with no off-setting efficiencies, and this can be detrimental to our economy

The proposed mergers regime under the Competition Act aims to address this concern. The mergers provision, which will prohibit mergers that substantially lessen competition, will take effect from 1 July 2007. The proposed merger regime incorporates international best practices and is adapted to suit Singapore’s unique circumstances. In administering the regime, the Competition Commission of Singapore or the CCS intends to focus its efforts on mergers that are likely to raise competition concerns, while minimising regulatory and compliance costs for the rest.

The CCS held a public consultation exercise on the proposed merger regime over three weeks last year.Business chambers, and professional and trade associations were invited to provide their inputs.Some of the submissions sought clarifications, while others provided feedback on the policies.I am happy to note that the proposals, on the whole, have been well-received by the business community.

The CCS has considered the feedback provided carefully and published its responses on 11 December 2006. Allow me to highlight some of the suggestions, arising from the consultation exercise, that have been accepted and incorporated.

One was for the CCS to hold pre-notification discussions with merger parties even before 1 July 2007, to benefit mergers which may be notified just after that date.These discussions are meant to expedite the merger review process, by helping merger parties to identify the information which they will need to submit for assessment. During the pre-notification discussion, the CCS will also try to provide a preliminary indication of the possible competition concerns associated with the proposed merger, based on the information provided to the CCS at that stage. In response to the suggestion, the CCS has agreed to accept requests for pre-notification discussions from 1 June 2007, a month before the merger provisions come into effect.

Another suggestion was for the government to set timelines for third parties submissions when they are consulted for their opinions on a merger. This is to prevent third parties from tactically delaying the merger transactional timeline. To balance the interest of all parties concerned, the CCS will, when seeking third party views, request that they be submitted within a stipulated timeframe, so that the CCS will have sufficient time to give due consideration to the submissions. CCS will be mindful of the need to give third parties sufficient time to develop their assessments. Equally, CCS will also scrutinise third-party submissions carefully, to ensure that frivolous ones do not frustrate or delay merger transactions.

The public consultation exercise has been productive and the CCS is now finalising the Amendment Bill for Parliamentary approval.Thereafter, the CCS will be issuing the finalised guidelines on merger procedures and how the CCS will go about assessing whether a proposed merger will raise competition concerns. These guidelines will provide important and useful guidance to businesses which are involved in merger discussions or transactions.

The CCS, which administers the Competition Act, has also been conducting outreach activities to raise awareness of the Act within the business community.For example, in partnership with the Singapore Chinese Chamber of Commerce and Industry (or SCCCI), CCS has organised briefing sessions in English and Mandarin last month to help members of the Chamber better understand how the Act can help to provide a level playing field for businesses, including SMEs, in Singapore, and what they can and should do if they come across anti-competitive practices.I urge all SMEs to take a keen interest in our competition law and competition issues.SMEs are significant buyers of goods and procurers of services, and your interests are best served by competitive markets that deliver the best products at the best prices. The CCS will be happy to organise similar briefing sessions for other SME and business associations, and I invite you to take them up on their offer.

Conclusion

In conclusion, I would like to reiterate the Singapore government’s commitment to continue nurturing an environment that is conducive to business and promotes a healthy and competitive market.The ongoing review of existing regulations and the implementation of new measures, such as the Competition Act, will be undertaken with this objective in mind and, in close consultation with the business community, to ensure a thriving pro-business environment and a level playing field for all companies in Singapore.

I would like to once again congratulate tonight’s award recipients and to wish all of you much success and prosperity in the year ahead.

Thank you.