Mr S Iswaran at the Regionalism and Modernisation of Viet Nam Economic Conference

keynote address by mr s iswaran, minister of state for trade and industry, singapore, at the regionalism and modernisation of viet nam economic conference sheraton saigon hotel, ho chiminhcity, on monday, 23 april 2007, 9.25am (ho chi minh city time)

“THE STRATEGY FOR REGIONAL ECONOMIC INTEGRATION AND ASIA’S FUTURE” 

Your Excellency Nguyen Sinh Hung, Deputy Prime Minister of Viet Nam,

Your Excellency Vo Hong Phuc, Minister of Planning and Investment of Viet Nam,

Members of the Vietnamese Government,

Distinguished Guests,

Ladies and Gentlemen,

Introduction

1. Let me first say it is my honour and privilege to join the Deputy Prime Minister of Viet Nam and other distinguished guests at the first economic conference on “Regionalism and Modernisation of Viet Nam”. The timing and theme of the conference is most apt within the context of today’s dynamic economic climate. I would, therefore, like to commend the organisers of the conference - Viet Nam’s Ministry of Planning and Investment, Viet Nam News Agency and Asia News Network - for providing this opportunity for policymakers, business leaders, and academics to exchange ideas on Asia’s and Viet Nam’s economic prospects.

Asian Economic Renaissance

2. This century heralds the economic renaissance of Asia. Indeed, the current resurgence of Asian economies is not surprising from a historical perspective.For most of history, China was the largest economy in the world and India the second largest, primarily because of their large populations. According to the Asian Development Bank, Asia accounted for as much as 58% of the global GDP in the year 1820. However, this figure dropped to just 19% in 1940.

3. Through a combination of sound development policies, judicious governance and a relatively favourable global economic climate, East Asia bounced back in the second half of the 20th century, led by Japan and the Asian tiger economies. But Japan slowed down in the 1990s and the growth story for many Asian economies lost its lustre, when we were struck by the Asian Financial Crisis of 1997. Asia has since emerged from the spectre of the Asian Financial Crisis, and is rapidly rising once more, in the first decade of the 21st century, and this time led by the rise of China and India, and a revitalised Japan.

4. Asia looks set to transform itself and indeed the world in this century. It is one of the leading drivers of the world economy, backed by the traditional powerhouse nations and the new emerging economies. Today, Asia accounts for more than 35% of the global GDP. The Asian Development Bank forecasts developing Asian economies to expand at 7.6% in 2007 and 7.7% in 2008. This would be underpinned by the strong growth in China and India, which accounted for about 70% of the economic expansion among developing Asian countries last year. The middle class in both countries is growing significantly, both in terms of population and disposable income.And China’s per capita income is also steadily increasing while India’s population is set to exceed China’s after 2030.

5. Viet Nam stands out as a particularly bright spark within a rising Asia. Its Doi Moi programme has been a significant success and, today, Viet Nam is enjoying a period of unprecedented growth.In 2006, Viet Nam’s economy grew at 8.2%, making it Asia’s second fastest-growing economy, and it drew a record US$10.2 billion of investments.By all accounts, 2007 seems to be heading for another record breaking year. In January this year, Viet Nam formally entered the WTO as its 150th member.

6. Viet Nam can also be a driver of growth and economic integration in Southeast Asia.Viet Nam has a youthful population of over 80 million. Viet Nam’s labour force is bright, hardworking and united by a common language that underpins your cultural resilience.And at the same time, English is fast becoming a common second language which enhances Viet Nam’s accessibility to, and connectivity with, the rest of the world.Viet Nam, therefore, has the potential to be an industrialized economy that is also strong in the service sectors.

7. But, this can only be achieved against a backdrop of a favourable global and regional economic environment.But, Asia’s growth prospects are by no means assured. There are several challenges ahead. Firstly, global economic competition is intensifying.The US and the European Union now account for about 40% of the global GDP.And both face important policy questions to maintain their economic competitiveness vis a vis Asia and the rest of the world so as to create jobs and wealth for their people.With a combined GDP of US$1 trillion, the Middle East is also a region of tremendous potential and opportunities, which is also increasingly engaged in the global economic arena. Secondly, while traditional security concerns within Asia have neither abated nor escalated, stability remains a concern in pockets of Asia. Instability outside the region could also affect us. And new security issues like terrorism, as well as healthcare risks like pandemics, also threaten to destabilise the region.

Asia’s Future: Regional Economic Integration and Stability are Important

8. It is, therefore, imperative that Asian economies continue to undertake joint efforts to grow the collective economic pie and contribute to regional stability.

9. One important way of doing this is through greater economic integration.On the one hand, we have countries and regions vying to attract Foreign Direct Investments in order to stimulate growth.On the other hand, we have corporations – whether they are domestic, regional or multinational – who constantly seek options to enhance their business efficiency and productivity.Economic integration enables companies to compete effectively in global markets.The removal or reduction of barriers to the movement of goods, services and capital lowers costs for businesses.It also means that they can reap economies of scale by gaining access to larger markets for their products and services.And they can also locate different parts of their production value chain in different locations, in order to optimise their operations, whether for sale within a region or for export to world markets.Also, with economic integration, there is greater consistency and transparency of investment rules, which in turn reduces risks for companies.In sum, with greater economic integration, we are better able to attract foreign direct investments, gain greater market access for local companies and derive broader benefits for our people and our economies.So the case for greater economic integration is compelling. 

10. Hence, Asia should continue to demonstrate strong support for the multilateral framework of the WTO, which is the only guarantee of a rules-based global trading system. Asia could also encourage and help non-WTO Asian countries to join the WTO, and, in this regard, Viet Nam’s recent experience will be invaluable.

11. Complementing the WTO framework, a number of regional economic architectures are emerging and consolidating in Asia. Let me start with ASEAN. ASEAN leaders marked a milestone in their decision to bring forward the realisation of the ASEAN Economic Community (AEC) from 2020 to 2015. The AEC will position ASEAN as a substantial economic entity of at least 500 million people in Asia, alongside China, India and Japan. The AEC will establish ASEAN as a single market and production base with the free flow of goods, services and investments; a freer flow of capital; equitable economic development, and reduced poverty and socio-economic disparities.

12. ASEAN has already brought down its tariffs for goods to between zero and five percent for more than 90% of intra-ASEAN products. ASEAN has concluded five packages of commitments under the ASEAN Framework Agreement on Services, and is committed to liberalise almost all sectors by 2015. ASEAN is also liberalising investment rules to enhance capital flows and is discussing ways to narrow the developmental gap among individual ASEAN countries.

13. At the recent ASEAN Summit in Cebu, the ASEAN leaders agreed to establish an ASEAN Charter which will provide an enhanced institutional framework for the grouping. This legal framework will set a firm foundation for the ultimate realisation of an integrated ASEAN economy.

14. The ASEAN+1 economic engagements offer yet another opportunity for closer economic integration. Presently, we are in an enviable position. Many of the major economies are keen to engage our region. ASEAN is making progress with China, Korea, Japan, India, Australia and New Zealand on free trade agreement talks. These dialogue partners are within the top ten trading partners of ASEAN. For instance, in 2006, trade between ASEAN and China hit a record high of US$160 billion.

15. The ASEAN+1 Free Trade Agreements will also pave the way for wider regional economic integration. ASEAN’s open and inclusive approach allows for emerging regional groupings involving ASEAN and countries like China, Japan, Korea, India, Australia and New Zealand. Asia should also support plans for a Free Trade Area of the Asia Pacific, which is being discussed in the APEC forum.This initiative will link the growth of Asian economies with key markets in the Americas.

Singapore’s and Viet Nam’s Role in Regional Integration and Stability

16. While ASEAN aims at integration at the macro level, strong intra-ASEAN bilateral relations are crucial building blocks.This can take the form of enhancing bilateral economic connectivity, sharing developmental experiences, transfer of capabilities, and collaboration with third countries.

17. The close ties between Viet Nam and Singapore is a good example. Singapore has been an early partner in Viet Nam’s growth story. The Viet Nam-Singapore Industrial Park, or VSIP, was established in 1996 and has attracted more than 230 investors from over 20 countries. The VSIP has become one of the more successful industrial parks in the country. The Viet Nam Investment Review recently quoted Singapore as the largest foreign investor into Viet Nam, with a cumulative registered investment of almost 9 billion US dollars. This is the result of many years of close collaboration.

18. Under the Viet Nam-Singapore Connectivity Framework, we are cooperating closely in the sectors of investment, trade and services, transportation, information technology and telecommunications, education and training, and finance. And Viet Nam and Singapore also work closely to attract third country companies, for example from Japan, to locate their investments in our two countries. 

19. One of the next challenges for Viet Namis to develop its urban areas to support further economic growth and to meet the aspirations of its people.We in Singapore, and I am sure many in the region and beyond, are more than happy to share our experience in these areas with Viet Nam.This is a win-win bilateral platform and an excellent example of the basic foundation upon which broader regional cooperation can be built.And, Singapore is firmly committed, along with ASEAN partners, to be a steadfast partner to Viet Nam as you move forward in your journey of economic growth and liberalisation.

Conclusion

20. To allow me to conclude by observing that in this century, Asia is poised to grow significantly and in turn drive global economic growth.The prospects are good but we can’t afford to be complacent. We have to press on with economic integration – at the bilateral, regional and multilateral level - and ratchet up our efforts to promote regional stability for Asia in order to remain relevant and competitive. Singapore and Viet Nam are like-minded partners in this Asian growth story.We look forward to working closely with Viet Nam to promote economic integration and growth in Southeast Asia and beyond, for the benefit of the people of all our countries.

21. Thank You