Speech by Minister Lim Hng Kiang at the Europe Day Celebration Luncheon at Shangri-La Hotel, Singapore

Your Excellency Michael Pulch, Ambassador and Head of Delegation of the European Union to Singapore,

Mr Stefano Poli, President of EuroCham,

Excellencies,

Distinguished Guests,

Ladies and Gentlemen,

Introduction

Good afternoon.

It is a great pleasure to be here to celebrate Europe Day. Indeed, there is much to celebrate. 64 years after the Schuman Declaration, Europe not only achieved long-term peace but also closer integration and higher living standards.

Even though Europe continues to face economic challenges, I am confident that the European countries are doing the necessary to put the European economy on the path of recovery. Indeed, a modest recovery in the EU has been gaining ground over the past few months. We are optimistic that these positive signs will strengthen as the EU and its Member States continue to improve their fiscal positions and overall competitiveness.

The Growth Story of ASEAN Remains Strong 

Although there have been improvements in the global economic outlook, several uncertainties in the macroeconomic environment remain. While the US economy may see some improvement in 2014, there is some uncertainty over the pace of future interest rate hikes.  This could weigh on financial markets and business sentiments, especially if market expectations differ from the Federal Reserve’s forward guidance. There are also risks of a sharper-than-expected slowdown in China as the government makes adjustments to rebalance the economy.  Finally, geopolitical uncertainties in various parts of the world may be a cause for concern for this year and could trigger instability should they escalate.

Despite these near-term economic headwinds, we feel that long-term economic outlook within the ASEAN region remains positive and resilient. With a population of over 600 million and a combined GDP that is 3rd largest in Asia (after China and Japan), ASEAN remains an attractive market and investment destination.  The number of middle class households in ASEAN is expected to more than double from 40 million in 2010 to 85 million by end 2017¹.  Anchored by the steady rise in domestic demand, growth across ASEAN is projected to average 5.4% per annum for the next five years².

Structurally, the ASEAN Economic Community (AEC) 2015 will provide a further boost to the positive outlook for the region.  Once this integration process as set out in the AEC strategic Blueprint is completed, we will have a region that will serve not only as an attractive market but also as a single production base where business operations will flourish. According to Deloitte’s study published last year, five of the top 15 manufacturing locations in the world will be in ASEAN by 2018³.  I am pleased to note that Singapore is one of the five.

Singapore Will Remain Competitive and Business Friendly Even As It Restructures Towards Quality Growth

Singapore is indeed fortunate to be strategically located in this neighbourhood of burgeoning economic activities. However, with our limited market size and resources, Singapore needs to be continually on the move to remain competitive.

As a maturing economy, we are facing challenges such as rising business costs and tightening labour market. To achieve sustainable growth, Singapore is moving towards a new phase of development to focus on achieving quality growth to keep our economy vibrant and to create good jobs for Singaporeans. 

Singapore will continue to move towards higher value-added activities and at the same time develop greater innovative capabilities.  Singapore will ensure that we maintain our strong business fundamentals, well-educated workforce and conducive regulatory environment to remain attractive to investors.

Indeed, many European companies continue to see value in partnering Singapore.  For instance, Royal Philips, a global leader in healthcare, announced last October the launch of a dedicated Hospital-to-Home (H2H) business for Asia Pacific in Singapore.  Royal Philip’s H2H business taps on Singapore’s multi-disciplinary research capabilities to co-innovate and develop new healthcare solutions to address growing challenges linked to a fast growing and ageing population in Asia.   With its regional HQ for the H2H business, Royal Philip joins the growing list of key industry players such as Bayer Healthcare and Siemens Medical Instruments that uses Singapore as a base to develop healthcare solutions catering to the needs of the Asian market.

European companies’ growing partnership with Singapore also extends to the area of logistics and supply chain management.  Last October, global supply chain innovator CEVA Logistics opened its first Centre of Logistics Excellence in Asia Pacific here.  The centre showcases ‘real world’ logistics innovation through supply chain optimization.  CEVA Logistics’ choice of Singapore reinforces Singapore’s status as a logistic and supply chain hub as we play host to other key European supply chain players such as DHL and DP Schenker.

Finally, just last week, I had the honour of participating in the opening of Rohde & Schwarz’s new facility in Singapore housing a global hub for R&D, Engineering and Production as well as its Regional Headquarters.  It is worth noting that as a German “Mittelstand champion”, one third of its net global revenue is done through its office in Singapore.   Like Rohde & Schwarz, many European companies such as Continental and Bosch, ST Microelectronics and Meggit Aerospace, have chosen Singapore as their regional hub for their corporate as well as high value-add function to serve the regional markets.

Singapore’s Network of FTAS and Connectivity Makes Singapore a Nexus of Global Business Activities.

Indeed, as companies expand globally, they tend to set up regional operations to serve the respective markets.  In today’s supply chain, it is not uncommon for the raw materials and components making up a final product to cross national borders many times during the production process.  As a business hub, it is imperative to give businesses the flexibility to source inputs from various countries across the region for their manufacturing activities and configure their supply chains in the most economical way.

For this reason, Singapore has been a long-standing proponent of free and open markets.  Connected to major economies and new markets in the region through an existing network of 20 regional and bilateral FTAs, Singapore position itself as a nexus from which companies can control and coordinate their regional and global business activities.  I am pleased to note that Singapore is ranked the fourth⁴ most connected country in the world by McKinsey Global Institute and is one of only two Asian cities amongst the top ten rankings.

Within our region, we are also seeing an increasing trend of regional integration. To enhance our relevance to global businesses, Singapore is actively involved in regional integration efforts such as the Regional Comprehensive Economic Partnership or RCEP. Beyond AEC 2015, ASEAN is working with our six FTA Partners, namely Australia, China, India, Japan, Korea and New Zealand, to link and consolidate all the FTAs under a single umbrella.  The RCEP comprises a market of more than 3.0 billion people and an aggregated GDP of over $US18 trillion.

Another important initiative that Singapore is actively involved in is the multilateral Trans-Pacific Partnership (TPP). The TPP is envisioned to be a forward looking and comprehensive trade agreement that will go beyond tariff elimination and other traditional trade issues to address emerging challenges faced by modern businesses. With its current twelve members, the TPP represents a free trade area of approximately 40% of global GDP and one-third of world trade.

Both the TPP and RCEP are envisioned as high-quality agreements to deepen regional economic integration and they serve as possible pathways towards an eventual Free Trade Area of the Asia-Pacific (FTAAP).

The EUSFTA Will Strengthen EU’s Linkage to ASEAN and Catalyse Greater Region-To-Region Integration

A much welcomed addition to our vast network of FTAs is the EU-Singapore FTA, which was initialled by the Chief Negotiators last September. The EU is our third largest trading partner and largest source of FDI.  There are over 10,000 European companies in Singapore. Not only will the EUSFTA strengthen our economic linkage with the EU, it will also offer EU companies a myriad of benefits such as tariff concessions, improved market access to various sectors and enhanced IP protection.

Beyond bilateral trade, the EUSFTA serves the broader strategic interests of the EU to engage the region.  As the EU puts in place the domestic economic reforms, it is also important for the EU to remain open and tap on the growth markets.  More specifically, the EUSFTA will provide a boost to the EU’s economic ties with ASEAN and serves as a path-finding template for the EU’s on-going negotiation with the other ASEAN countries such as Malaysia, Vietnam and Thailand.  Once concluded, these bilateral FTAs can pave the way towards an eventual EU-ASEAN FTA. Therefore, it is in the interest of both EU and Singapore to see the EUSFTA come into force early to allow businesses to reap benefits as soon as possible.

Conclusion

The successful conclusion of the EUSFTA exemplifies the excellent bilateral relations between Singapore and the EU. I understand that this year also marked the 10th anniversary of the formal opening of the EU Delegation Office in Singapore. Over the years, there have been tremendous changes in Singapore and Europe but our ties remain resilient, both in good times and more challenging circumstances.

We also acknowledge the important role that established European firms such have been playing in Singapore’s economic development from the time when we were a young industrialising nation to the knowledge-based economy which Singapore is today.

On this occasion, I would like to thank EuroCham and your members for your contribution to the strengthening of Singapore-EU relations over the years. I look forward to the deepening of Singapore-EU relations in the years ahead and I wish the EU a prosperous future.

Thank you.

¹ Riding the ASEAN elephant: How business is responding to an unusual animal, Economist Corporate Network (2013)

² According to the OECD Development Centre’s publication, “Economic Outlook for Southeast Asia, China and India 2014”, ASEAN is projected to grow on average by 5.4% per annum between 2014 and 2018.

³ Deloitte Global Competitiveness Index 2013. Singapore, Vietnam, Indonesia, Malaysia and Thailand are the five ASEAN countries mentioned.

⁴ Singapore is ranked 4th after Germany, Hong Kong and US.