Mr Teo Ser Luck's Speech at the CFO Connection Symposium 2015

​KEYNOTE SPEECH BY MR TEO SER LUCK, MINISTER OF STATE FOR TRADE AND INDUSTRY AT THE CFO CONNECT SYMPOSIUM 2015 AT FOUR SEASONS HOTEL, SINGAPORE, ON THURSDAY, 27 AUGUST 2015, 9.00 AM

Mr Chng Lay Chew,
Chairman of Singapore CFO Institute

Mr Michael Lim,
Chairman of Singapore Accountancy Commission

Distinguished guests, ladies and gentlemen,

1. Good morning. It is my great pleasure to join you at today’s CFO Connect Symposium.

2. This symposium is taking place at a critical and exciting time in the region. This year is an important milestone as ASEAN will announce the realisation of its vision for an ASEAN Economic Community, or AEC 2015. All the ASEAN countries are intensifying efforts towards achieving a free flow of goods, services, investment, skilled labour, and a freer flow of capital in the region. Steps are being taken to reduce or eliminate tariff and non-tariff barriers to facilitate trade and investment to create a single market and production base in the region. New laws and institutions for fair competition are being progressively developed to attain a highly competitive economic region. There will be benefits for businesses, including for SMEs as ASEAN becomes a region of equitable economic development. ASEAN will continue to strengthen and improve engagement with our Dialogue Partners to ensure that we remain plugged in the global supply chain and are fully integrated into the global economy.

A Growing ASEAN

3. ASEAN is one of the most dynamic and fastest-growing regions in the world. With a market of over 600 million consumers and a combined GDP of nearly US$3 trillion[1], ASEAN has been remarkably resilient, having weathered significant economic transformation and a series of financial crises that hit the region over the last few decades. ASEAN is expected to continue rapid and sustained growth, with annual growth projected to average 5.6 per cent from 2015 to 2019[2]. Income levels are expected to rise, with 65 per cent of the population projected to reach middle class status by 2030.[3] As the economy develops and people’s standards of living increase, so will demand and consumption levels.

Opportunities of the AEC 2015

4. With such promising prospects in the region, there is of course great interest from businesses in the opportunities the AEC 2015 presents. Today, I will share with you:-

(i) How ASEAN Member States’ commitment to the AEC 2015 can benefit the people and businesses of ASEAN; and

(ii) Some examples of those that have already benefitted.

The AEC 2015

5. The commitments ASEAN Member States have made to realise the AEC 2015 are wide-ranging to benefit a large spectrum of people. All these commitments are captured in an AEC 2015 Blueprint, in a transparent manner for the public to access. In this crucial year, ASEAN officials and policy-makers are closely monitoring how well the ASEAN Member States are implementing their commitments, and this shall be reported to and announced by ASEAN Leaders in November this year at the ASEAN Summit in Kuala Lumpur.

6. Manufacturers and traders of goods in the region have already started benefitting from the ASEAN Trade in Goods Agreement, or ATIGA; the ASEAN Customs Integration initiatives; and our Standards and Conformance initiatives. The ATIGA has reduced or eliminated tariffs on goods in ASEAN, allowing costs of doing business to be cheaper, and prices of final goods to the consumer to be lower. To complement this, Customs Administrations in ASEAN are committed to simplifying their rules so that goods can cross borders faster and more easily. Initiatives to harmonise standards, technical regulations, and conformity assessment procedures with international practices minimises duplicative testing of a product, allowing goods to reach customers faster and more cheaply.

7. Services providers in ASEAN can benefit from entering markets in the region that were formerly closed. ASEAN Member States have committed to progressively remove discriminatory barriers to services entering their markets from fellow ASEAN countries. ASEAN Member States have eased restrictions to cross-border services trade in at least 80 services sub-sectors and now allow for majority foreign ownership in many of these areas. This means companies based here can more easily participate in several services sectors in ASEAN, such as professional services, computer services, e-commerce, construction services, telecommunications, logistics, air transport services, maritime transport services, and tourism. The movement of our professionals in the region has also been facilitated by Mutual Recognition Arrangements that ASEAN Member States have signed for eight professional fields. Through ASEAN Member States’ recognition of their qualifications, engineers, nurses, surveyors, architects, dentists, medical doctors, accountants, and tourism professionals can more easily find work beyond their own shores in other ASEAN countries, taking into account domestic regulations.

8. For our companies aspiring to expand their businesses overseas, ASEAN is ripe for the taking. ASEAN is set to become one of the largest consumer hubs in the world, making the region an attractive place to invest in. Companies worldwide are already tapping on this potential. Japanese retailers such as Fast Retailing Co. Ltd., who also own the well-known Uniqlo apparel brand, have opened flagship retail operations in Jakarta. The Lotte Group, a South Korean retailer, has opened huge supermarkets in Indonesia and Vietnam.[4] Last year, total FDI inflows to ASEAN reached more than US$136 billion[5].

9. For investors already investing in ASEAN, the AEC provides them with some protection. The ASEAN Comprehensive Investment Agreement, or ACIA, ensures that investors in an ASEAN Member State are accorded fair and equitable treatment, no different from the treatment accorded to that ASEAN country’s own local company. It also protects our investors in times of conflict, where compensation may be sought if their investments are affected. These protection guarantees provide stability and certainty to investors and further boost investor confidence. Singapore already enjoys the benefits of a vibrant ASEAN, with our contribution to intra-ASEAN FDI standing the highest among ASEAN countries at more than 58 per cent in 2014.[6]

10. Complementing these commitments and bringing ASEAN to the next level are other AEC initiatives that enhance our business environment. ASEAN Member States are developing national Competition Policy laws that will promote efficiency, productivity, and innovation. They are enhancing their Intellectual Property Rights regimes and putting in place Consumer Protection regulations for fair trading practices in dealing with consumers. They are developing cooperation in Information and Community Technology Cooperation; Energy; and Transport and Infrastructure, which open up huge business opportunities for companies and individuals in these fields.

Under the Finance Track

11. Financial integration is an important component of the AEC 2015. It supports economic growth, strengthens financial markets, and promotes financial inclusion, which complements trade integration. The pace of financial integration has however been generally slower as it involves complex issues such as harmonising of regulatory standards, market conduct practices, and conditions of licensing. Good progress has nevertheless been made.

12. For instance, in banking, ASEAN countries have established the ASEAN Banking Integration Framework (ABIF), which provides a platform for two or more ASEAN countries to agree on specific areas for liberalisation based on ASEAN banks’ commercial interests. This facilitates the expansion of our local banks in ASEAN, placing them in a stronger position to support the regional expansion plans of Singapore businesses.

13. In capital markets, a key initiative is the adoption of fully-harmonised disclosure standards by Singapore, Malaysia, and Thailand for equity and debt offerings. This allows an issuer to access all three markets using a single set of prospectus, making fund-raising in the region more efficient and cost-effective.

Developing and Supporting our SMEs

14. With SMEs accounting for more than 96 per cent of all enterprises in ASEAN, and contributing up to 85 per cent of ASEAN’s combined GDP[7], SME development and support are key priorities under the AEC 2015. Singapore’s interest is in enabling our SMEs to take advantage of the tremendous potential and opportunities the AEC presents. Building the capabilities of our SMEs is thus essential, to equip them to compete in the regional and global economy, for successful expansion beyond our shores.

15. Singapore will be undertaking two initiatives to support this: (i) the SME Business and Financial Management Programme; and the nationwide SkillsFuture movement. These are valuable schemes, which merit some elaboration.

(i) The SME Business and Financial Management Programme is a new strategic partnership between the Singapore Business Federation (SBF), the Singapore Management University – School of Accountancy (SMU), and the Singapore CFO Institute. This programme is meant to equip the finance functions of SMEs with the practical tools, technical competencies and business and financial management capabilities to steer their businesses forward on their journey of growth and expansion. This is an industry-led, collaborative effort which curates and leverages the expertise of each of the partners - the SBF as the apex business chamber representing the voice of SME businesses in Singapore; SMU for its academic rigor and programme design; and the Singapore CFO Institute for its influence and reach within the CFO community. It is heartening that the partners have dedicated their expertise and pooled their resources to develop this flagship programme specifically tailored to benefit and grow our local SMEs.

(ii) On the other hand, SkillsFuture is a larger, nationwide movement that complements existing efforts such as the SME Talent Programme to help companies access talent and improve the capabilities of our workforce. Under SkillsFuture, there are a variety of resources to help Singaporeans to develop and deepen their skills so that they can advance in their careers, which will also benefit SME employers. For example, the SkillsFuture Earn and Learn Programme will support fresh polytechnic and ITE graduates to gain valuable work experience as new employees, while concurrently studying for further industry-relevant qualifications that will enable them to contribute to their companies in more ways, especially in an industry like Finance where industry certification is important. SkillsFuture will also extend Study Awards and Continuing Education and Training subsidies for early to mid-career Singaporeans to upgrade their skills. There is also the Sectoral Manpower Plan (SMP) for the Finance sector, which serves to project future skills needs for the sector and set out a systematic plan to develop those skills. One component of the SMP is

the International Postings Programme (iPOST) which supports overseas postings for Singaporeans working in the finance industry. This will help them acquire valuable overseas exposure and experience that will help their companies’ regionalisation efforts.

16. We have had many success cases with our SMEs venturing abroad, using the assistance schemes under IE Singapore and SPRING. PBA Systems Pte. Ltd. for instance, expanded into Malaysia to secure a new customer base. Mandai Link Logistics Pte. Ltd., a company specialising in the distribution of frozen food, has established sales offices in Surabaya and Jakarta. Not to mention the many more homegrown names we are proud to see when we are overseas.

Conclusion

17. Having already risen up to challenges, ASEAN has to be prepared for many more challenges ahead. Operationalising commitments is not always easy. There are domestic stakeholders to answer to and differing interests to take into account. Addressing business needs and realities is another pertinent challenge in this fast-paced, technological world. Some of the topics you will be discussing at this Symposium, on Finance Futurescape 2030, the Internet of Things, and Disruptive Technology, attest to the need to always look ahead. The world’s increasing interdependence poses another challenge, making us increasingly exposed to economic risks that happen elsewhere. ASEAN was quick to feel the impact of the Eurozone’s financial volatility, the plunge in China’s stock market, and the devaluation of the Chinese Yuan.

18. It thus remains crucial for ASEAN to stay on course in its economic integration efforts and to embrace business feedback and future needs. Hence efforts to build on the progress achieved and to further enhance economic integration beyond AEC 2015 is being undertaken. Governments and businesses must continue to closely collaborate to ensure a stable and prosperous region for us all. On this note, I wish all of you a productive session ahead.

Thank you.

[1]Source: ASEAN Statistics Database 2015

[2]Source: OECD: "Economic Outlook for Southeast Asia, China and India 2015: strengthening institutional capacity"

[3]Source: ASEAN Development Bank 2014

[4] Source: L.E.K Consulting, 2013 "Spotlight on the ASEAN Consumer: An Emerging Middle Class Continues to Drive Consumption Growth"

[5] Source: ASEAN Investment Surveillance Report 2015

[6] Source: ASEAN Investment Surveillance Report 2015

[7] Source: ASEAN’s official website on SME development