Speech by Minister Lim Hng Kiang at the Singapore-Japan Business Forum (SJBF)

​SPEECH BY MR LIM HNG KIANG, MINISTER FOR TRADE AND INDUSTRY (TRADE), AT THE SINGAPORE-JAPAN BUSINESS FORUM (SJBF) ON FRIDAY, 15 JULY 2016, 0900 HRS, GRAND BALLROOM 1-2, LEVEL 3, GRAND HYATT SINGAPORE

​Mr Tsuyoshi Hoshino
Parliamentary Vice-Minister for the

Ministry of Economy, Trade and Industry

Mr S.S. Teo

Chairman, Singapore Business Federation

Dr Sadayuki Sakakibara

Chairman, Keidanren

Mr Hiroyuki Ishige

Chairman and CEO, Japan External Trade Organization

Distinguished Guests

Ladies and Gentlemen

Good morning.

1. It gives me great pleasure to speak at the Singapore-Japan Business Forum today. This year marks the 50th anniversary of diplomatic ties between Singapore and Japan. I would like to thank the Singapore Business Federation (SBF), the Keidanren and the Japan External Trade Organization (JETRO) for bringing together business representatives from Singapore, Japan and the region to mark this special occasion.

Singapore and Japan’s Strong Bilateral Relations

2. Singapore and Japan share longstanding and deep bilateral economic relations. For the past 50 years, bilateral trade has increased close to 80 times from S$587 million in 1966 to S$46.5 billion last year. Japanese companies have been investing in Singapore since the 1960s. Cumulative foreign direct investment (FDI) from Japan into Singapore in 1970 amounted to S$120 million. Since then, Japan has consistently been one of Singapore’s largest investors. In 2014, Japan’s cumulative FDI to Singapore increased to about S$110 billion. That is a 900-fold jump from 1970. Singapore is also Japan’s top Asian investor and fifth largest source of FDI.

3. Our strong trade and investment relations are underpinned by the Japan-Singapore New-Age Economic Partnership Agreement (JSEPA). The JSEPA is a key pillar and significant milestone of our bilateral relations. It was Japan’s first bilateral economic partnership agreement and Singapore’s earliest with a major trading partner. Both countries are currently reviewing JSEPA to ensure that it remains updated and relevant for Singapore and Japanese companies. This is especially important as the global economic landscape evolves.

4. Apart from JSEPA, Singapore and Japan are also close partners in regional economic integration. We are both members of the Trans-Pacific Partnership (TPP), ASEAN-Japan Comprehensive Economic Partnership (AJCEP) and Regional Comprehensive Economic Partnership (RCEP). Specifically, the AJCEP and RCEP are regional economic architectures that involve ASEAN, a region whose growth in GDP per capita has outpaced the rest of the world since the late 1970s.

ASEAN’s Growth Story

5. Companies are increasingly investing their resources in the ASEAN markets for the following three reasons.

6. First, ASEAN is a market that is both growing in size and increasingly integrated. The establishment of the ASEAN Economic Community (AEC) in 2015 has created more business opportunities for companies by eliminating trade barriers and improving market access.

7. Progress in the AEC is healthy. For example, virtually all goods can now flow throughout ASEAN tariff-free. This allows businesses to trade and gain market access in the region without having to bear customs duties. Stronger and more pro-business investment rules have also given investors enhanced protection and greater legal certainty as they do business across ASEAN.

8. The figures also speak to ASEAN’s growth potential. From 2010 to 2014, ASEAN recorded annual GDP growth of between 4.6% and 7.6%. Experts estimate that ASEAN could become the fourth largest single market in the world by 2030, after the US, EU and China, with a combined GDP of US$10 trillion. By 2025, 50% of ASEAN’s population will be middle-class. By 2030, 65% of ASEAN’s population will be living in urban cities.

9. These figures lead to my second point. Urbanisation and an increasingly connected population in ASEAN present opportunities for investments in infrastructure and the digital economy.

10. The ASEAN infrastructure market holds huge potential over the next decade, particularly in the energy and transportation sectors. An estimated US$60 billion will be needed annually until 2022 to fulfill the infrastructure needs of the ASEAN region. ASEAN cities will also need to transform their infrastructure by leveraging on technology as well as address challenges such as congestion and waste management. This creates opportunities for companies focusing on infrastructure and IT-related solutions.

11. Strong growth is also expected in the relatively underdeveloped e-commerce space. E-commerce in ASEAN countries accounts for less than 1% of total retail sales, compared to rates of 6 to 8% in Europe, China and the US1. There are tremendous opportunities to be captured since ASEAN’s e-commerce market is expected to grow rapidly due to consumers’ increasing spending power and growing Internet penetration.

12. The growth of Internet users in the region is astonishing. In Indonesia for example, the number of Internet users has risen 150% per year over the past decade to reach 90 million. Many of ASEAN’s new Internet users are also going mobile. Smartphone subscriptions in the region are expected to grow approximately five-fold in three years’ time. With a large, youthful and increasingly connected population, ASEAN has an opportunity to pioneer the development of new mobile-first or omni-channel digital services. 

13. Third, the advent of new technologies will foster innovative business models that blur industry boundaries and disrupt traditional ways of doing business. For example, additive manufacturing or 3D printing will enable rapid prototyping and optimised design in manufacturing. Advanced robotics can vastly improve manufacturing’s efficiency. Digital technologies like Artificial Intelligence (AI), the Internet of Things (IoT) and Big Data enable innovation and new business models that will help companies gain better access to markets and address evolving consumer preferences. 

14. The application of data analytics would certainly be useful in ASEAN, a disparate region with different cultures, languages and religions. Through data analytics, companies can harness consumer insights to address local preferences as well as cultural sensitivities. They would do well to avoid a one-size-fits-all strategy when developing products and solutions for ASEAN’s different markets. 

15. There is clearly an abundance of business opportunities in ASEAN. Singapore is keen to work with Japan to harness the commercial potential of this huge market together. 

Japan and Singapore are like-minded partners 

16. Japanese companies have long played a part in Singapore’s growth history. In the next 10 to 20 years, opportunities for collaboration between Singapore and Japan will continue to arise from our alignment of interests. 

17. In our next phase of growth, Singapore and Japan companies are both pursuing innovation-driven growth. This involves a shift from a value-adding economy to a value-creating economy. Singapore’s competitiveness will continue to be on the basis of technological skills and capabilities instead of cost alone. This is also the case for Japanese companies for some time already. 

18. We are therefore keen to continue building on our strong partnership with Japan to serve as Japan’s essential gateway to ASEAN and global business. We can be the base for development of new and transformational technologies in the region. 

Leveraging on Complementary Strengths 

19. Japan possesses world-renowned technological strengths. New technologies in Japan are regularly applied to increase productivity in its manufacturing sector and to help address social issues such as aging population. Singapore has complementary strengths to Japan. This makes us a good partner to tap business opportunities in ASEAN and beyond. 

20. First, Singapore is a microcosm of a highly diversified Asia. We are also in close proximity to important markets like ASEAN, China, and India. This makes Singapore an ideal location for Japanese companies to undertake innovation-intensive activities and develop solutions for our region. For instance, Japanese flavours and fragrance company Takasago, is finding research talent and subjects to develop and test Halal food products in Singapore. It aims to capture market opportunities in the regional Halal food space. The fast-growing global Muslim population is estimated to surpass a quarter of the world’s population by 2030. With rising affluence and a growing Muslim population, ASEAN is fast developing as a hub for businesses developing products for the Halal consumer2. 

21. This also makes the experience of Singapore companies particularly valuable for partnerships in the Japanese market. There continues to be opportunities in the tourism, electronics and food services sectors to tap on. For instance, since 2013, Singapore’s leading electronics component distributor Serial Systems has been in partnership with Japan-listed AMSC Co. Ltd to sell and distribute electronics products in Japan. 

22. In the tourism space, Ascott announced in 2014 that it will open its first Ascott residence in Marunouchi, Tokyo. This will be done through a master lease agreement with Mitsubishi Estate Company (MEC), one of Japan’s largest real estate developers. The residence is slated to open in 2017, ahead of the 2020 Olympics in Tokyo. 

23. Second, Singapore provides complementary strengths to Japan in terms of innovation. We possess a strong suite of open innovation platforms and ecosystem for industry partners. For example, we have institutes of higher learning, research institutes and other corporate R&D centres to support Japanese companies in their innovation-intensive activities. These activities could be in the areas of applications development or even new business generation. 

24. For example, in 2013, NEC led a consortium to participate in Singapore’s Safe City Test Bed to develop new public safety solutions. The test bed resulted in the successful development of new solutions and NEC decided to establish the Global Headquarters for its Public Safety business in Singapore. This outfit oversees activities such as product and solutions development, strategic planning, as well as training and technical support for global subsidiaries and partners. 

25. Singapore is also a good location for Japanese companies to find suitable technology partners to conduct research, improve business operations and develop new products. For instance, Denka has worked with Emerson on a pilot project to use Emerson’s Pervasive Sensing technologies as part of an Industrial IoT solution. The project improved Denka’s manufacturing process efficiency. This resulted in reduced carbon emissions for one of its plants here resulting in substantial cost savings. 

26. Another example is the first commercial application for SoftBank Robotics’ humanoid robot Pepper. This was jointly developed by the MasterCard R&D team in Singapore and Pizza Hut Restaurants Asia. The application aims to provide customers with personalised shopping and concierge services. 

27. Third, Singapore is a good location for companies to access market opportunities in the region by finding suitable partners. For instance, NEC has its Asia Pacific HQ in Singapore. To access opportunities in the region, it has worked with Singapore’s ST Electronics as a market access partner to commercialise its cloud services. Additionally, Mitsubishi Corporation has a partnership with Olam, a leading global agri-business that is headquartered in Singapore, to explore integration across the value chain. They will also tap on each other’s networks in regions for distribution and retail to grow their businesses. 

Conclusion 

28. As we celebrate our long history of collaboration, Singapore and Japan will continue to look ahead for further collaboration opportunities. We would continue to strengthen bilateral ties and collectively address regional trade and investment challenges. ASEAN is an increasingly integrated and rapidly developing region. I encourage Singapore and Japanese companies to continue to work closely together to tap on the arising opportunities and contribute to the prosperity of our region. Captains of industry who are gathered here will play a vital role in fostering greater partnership and seizing these opportunities. 

29. I look forward to active discussions amongst all of you and wish you a fruitful session ahead. Thank you.

1 Source: A.T. Kearney​
2 Source: Euromonitor. 

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