Speech by Minister Iswaran at the SICC Distinguished Speaker Series

Mr Victor Mills, Chief Executive of SICC, 

Ladies and Gentlemen,

1. Thank you for giving me this opportunity to speak to all of you. 

2. 2020 has been a challenging year - for individuals and workers, families and businesses, societies and economies. 

3. The Ministry of Trade and Industry’s (MTI) forecast for our economic growth this year is sobering – a contraction of between 5% to 7% this year. In the second quarter, our economy contracted by 13.2% on a year-on-year basis. That is our worst quarterly performance on record. The impact has been uneven, with some sectors harder hit than others. Aviation and tourism, in particular, have been severely affected by travel restrictions and falling global demand.  No country has been spared.

4. The World Trade Organisation expects global trade to fall by between 13% and 32% in 2020, based on its forecast released in April 2020.  This may not be a one-off phenomenon; supply chains are shifting as we speak, as countries and companies seek greater resilience against disruptions from crises like COVID-19 and growing tensions between the major powers. 

5. Against this backdrop, we have seen the rise of nativist rhetoric and politics.  The merits of free trade and global economic integration are increasingly being called into question and subject to populist pressure.  

Remaining open in a fractured world: value of our FTAs

6. These are the pressures that every country will need to navigate, and find solutions to, in these challenging times. In Singapore, we are working hard to address the dislocations caused by the pandemic, technology shifts and geopolitical forces, to our businesses, workers and vulnerable groups.  At the same time, we must position ourselves to reap longer term opportunities.  The decisions we make now will have lasting impact on our economy and society.    

7. As a small city-state that has grown and prospered by staying open and connected, we are deeply cognisant that closing our doors to the world is not an option for Singapore. The Government’s assurance to members of the business community is that we are committed to keeping Singapore open to international business and global flows of goods and services, investment, capital, talent, and, increasingly, data.  Free trade is in our DNA, and Free Trade Agreements (FTAs) are an important component of our overall economimc strategy. 

8. How do FTAs benefit Singapore-based companies?  First, our FTAs lower tariff and non-tariff barriers for goods originating from Singapore entering markets covered under the FTAs.

9. For instance, the European Union – Singapore FTA (EUSFTA) is the first bilateral FTA signed by Singapore where Asian food products that have been made in Singapore can enter the EU tariff free, under the flexible Rules of Origin secured. This helps our exporters stay price competitive. EU imports from Singapore were up 12% in the six-month period after the FTA came into effect, despite an overall decrease in total EU imports by 10.6% the same period (Dec 2019-May 2020).

10. Our studies have also found that, for bilateral FTAs, Singapore’s domestic exports to each respective partner country increased by 34% in the three years after entry into force of that FTA.

11. FTAs also help our service providers, by increasing overseas market access opportunities in various sectors such as financial, education, health, logistics, distribution, and transport services. Such opportunities especially benefit our SMEs, by providing paths for them to venture abroad and grow through international expansion. FTAs foster a predictable operating environment for our companies, enabling them to venture abroad with greater confidence and protection.

12. As our homegrown companies internationalise and grow, they also increase the pool of job opportunities for Singaporeans. Some of these roles entail working abroad or in collaboration with overseas counterparts, helping our workers gain valuable regional and international experience. This is the direction of growth we want to encourage and support.

13. Second, the value of Singapore’s FTAs are more than the sum of its parts. Our wide network of FTAs is one of several factors that enables us to continue to attract global investors that create new and diverse job opportunities in Singapore. Even in this challenging climate, EDB has secured over $13.3 billion in fixed asset investment commitments for the first half of 2020 (exceeding the $8-10 billion per annum goal). About 11,000 jobs – across diverse sectors such as biomedical manufacturing, HQ and professional services, and R&D – will be generated when the commitments as of June 2020 are fully realised. These investments also drive demand in related sectors and ancillary services. 

14. Third, our FTAs have collectively enabled us to diversify our supply lines and boost our resilience. During the COVID-19 pandemic, we worked with key FTA partners such as Australia, New Zealand, the Republic of Korea, Japan and India to ensure that essential supplies continued to flow without tariff or quota restrictions or other trade barriers. 

Seeking out new opportunities for commerce and connectivity 

15. Singapore’s extensive network of trade agreements has created opportunities for our economy and strengthened our strategic economic relations.  We will continue to capitalise on these strong foundations, whilst keeping a keen and steady eye on new developments and opportunities.  For example, one of the key effects of COVID-19 has been its acceleration of digitalisation, and the growth of the digital economy. An ever-greater share of global trade is being conducted or facilitated digitally today. 

16. E-commerce, for one, has received a significant boost from the pandemic. Online retail sales in Singapore rose by almost 40% year-on-year in both February and March this year. 

17. Traditional trade rules and policies are less suited for the digital or digitally-enabled transactions of the 21st century. 

18. For instance, as e-commerce takes off, consumer goods are increasingly traded in large volume, lower value transactions. Traditional customs duties and procedures would not facilitate such retail e-commerce. Requirements to localise data or other restrictions on data flows are also rapidly becoming the trade barriers of the 21st century.

19. Singapore is thus developing a network of international partnerships called Digital Economy Agreements (DEAs) to help businesses manage their global platforms and digital services out of Singapore more efficiently. We are collaborating with like-minded partners to establish a network of DEAs, akin to our FTA strategy. We have signed DEAs with Chile, New Zealand and Australia, and talks are underway with the Republic of Korea. 

20. The DEAs will deliver three key benefits for businesses:

21. First, seamless end-to-end digital trade. DEAs establish a framework for Government-to-Government cooperation for interoperable digital identities, e-invoicing, and e-payments systems across borders. This means, for instance, that a Singapore business may use CorpPass and PayNow Corporate to transact in our DEA partner countries. 

22. Second, trusted cross-border data flows. DEAs seek to minimise, if not eliminate, any restriction on data flows while ensuring that privacy is protected. DEAs support the alignment of cross-border data policies and legal frameworks. Such clear and harmonised rules will support our businesses, especially SMEs, expand overseas through e-commerce and other forms of digital economic activity.

23. Third, trust in digital systems. DEAs ensure that regulations guard against harm to the interests of consumers engaged in online commercial activities. DEAs also promote the adoption of Artificial Intelligence (AI) ethics and governance frameworks, in order to harness AI in a responsible manner. 

24. DEAs can also address emerging technologies, allowing for the establishment of international rules and benchmarks in nascent areas of the digital economy such as Fintech and data innovation. These issues are unique and intrinsic to the digital domain and affect digital trade, but are not sufficiently covered in our existing FTAs. There is much value in fostering greater cooperation in these new areas, and we have signed seven MOUs with Australia, covering emerging areas such as data driven innovation and trade facilitation. 

25. Our goal is to build the necessary trade infrastructure for businesses based in Singapore to thrive in the digital economy.  Companies can look forward to improved efficiency, reduced cost and enhanced trust when doing business with their overseas partners. Businesses can also better manage their global platforms and digital services out of Singapore, with an open digital trade architecture that supports secure and free flow of data. 

Ensuring inclusive growth

26.The digital economy will serve as a key engine for growth, offering businesses opportunities to transcend the limitation of scale and the barrier of distance. At the same time, we must ensure that everyone - businesses, workers and individuals - are equipped with the necessary digital tools, skills and knowledge to benefit from the opportunities afforded by the digital economy.  

27. The Government will continue to support SMEs to adopt new technologies and build new capabilities. We will continue to upskill our workers, digitalise operating systems and develop new business models in partnership with businesses. 

28. Businesses can tap on government schemes such as the Productivity Solutions Grant and SMEs Go Digital programme, to help your company digitalise. 

Conclusion

29.These are unprecedented times, with mounting geopolitical uncertainties and economic headwinds. Against this backdrop, we must continue to remain open and connected to the world, while making every effort to ensure that the gains from trade and opportunities for growth are distributed equitably. Ultimately, how well we emerge from this crisis will depend on our people, industries and government coming together in common cause to overcome not just our immediate challenges, but also lay the foundation for our long term competitiveness and growth.  

30. Thank you.