Speech by Minister S Iswaran at the Third South Asian Diaspora Convention

KEYNOTE ADDRESS BY MR S ISWARAN, MINISTER FOR TRADE AND INDUSTRY (INDUSTRY), MINISTRY OF TRADE AND INDUSTRY, AT THE THIRD SOUTH ASIAN DIASPORA CONVENTION AT RAFFLES CITY CONVENTION CENTRE ON MONDAY, 18 JULY 2016, 9.45 AM

Your Excellency, Mr Malik Samarawickrama, Minister for Development Strategies and International Trade, Government of Sri Lanka,

Your Excellency, Dr P Narayana, Minister for Municipal Administration and Urban Development, Andhra Pradesh, Government of India,

Distinguished Guests,

Ladies and Gentlemen,

1.         Good morning. I am pleased to join you this morning at the third South Asian Diaspora Convention. Let me extend a warm Singaporean welcome to our distinguished delegates from overseas. The strong attendance at this convention attests to the strong and growing interest in South Asia, and the acumen of Ambassador Gopinath Pillai and the Institute of South Asian Studies.

2.         This convention takes place at an interesting juncture. Global economic conditions remain uncertain, exacerbated by more recent developments like Brexit. Asia, notwithstanding this general uncertainty, remains the centre of gravity for global growth, which is underpinned by fundamentals and demographic trends.  South Asia, especially, has been a bright spot of opportunity and an area of focus is infrastructure. Infrastructure investment is today top of mind for many governments and businesses due to the enormous infrastructure requirements that must be built, and funded, in order to sustain economic growth and raise standards of living in South Asia. The large and growing demand for new or upgraded infrastructure in Asia is evident, fuelled by fast-paced urbanisation and a rising middle class, especially in South Asia where the World Bank estimates that the urban population will grow by 250 million people over the next 15 years.[1]

3.         Companies in Singapore, with their expertise and capabilities, are in a good position to help meet South Asia’s significant needs in sectors such as utilities, roads, ports, airports, and industrial parks. Indeed, several of our infrastructure companies are already active in the region. For example, I attended the inauguration of the 2.6 Gw Sembcorp Gayatri Power Complex in Andhra Pradesh earlier this year, and recently visited Prima Group’s processing plant in Trincomalee, Sri Lanka. Infrastructure remains a major area focus for the world, especially in Asia. In Singapore infrastructure is part of our work in the Committee of Future Economy which is charting the way forward for Singapore’s economic growth and development. The capabilities driven by projects in Singapore including our Smart Nation initiative, as well as professional services and financial infrastructure can support this sector which has significant opportunities.

4.         Indeed, beyond expertise and capabilities, financing solutions will be critical if South Asia’s infrastructure needs are to be fully met. While global spending on infrastructure is expected to reach US$9 trillion by 2025[2], there are financing gaps in many countries. According to the World Bank, South Asia faces an infrastructure gap of more than US$2 trillion from 2015 to 2025. Government fiscal deficits have hampered the traditional means of financing public infrastructure through fiscal outlays. This has led to the rise of PPP models where the private sector partners governments to fund projects. However implementation challenges and unmitigated risks have also caused investors to be wary of entering into such PPPs.

5.         In Singapore we have built a strong infrastructure finance ecosystem, with foreign and local financial institutions such as the World Bank, Clifford Capital, or the IFC Global Infrastructure Fund offering solutions to bridge the financing gaps in the region. These institutions also offer project structuring services, which has in turn attracted a whole suite of services for the early development stage of a project, up to its financing and execution stages. Consequently, Singapore has emerged as an infrastructure hub for Asia, and continues to develop infrastructure as an attractive asset class for investors. This is supported by the further development of financing solutions and the technological capabilities of companies that are a part of the infrastructure value chain.

6.         Companies in Singapore and the region should take full advantage of this ecosystem to look seriously at developing and investing in South Asia’s infrastructure. This will not only help to close the infrastructure gap in the region, but also significantly help the economies by providing jobs and increasing the capacity for future growth.

7.         For their part, South Asian governments are keenly aware of the need to create an investor-friendly environment, which is essential to attract the foreign investments that are needed to close that US$2 trillion infrastructure financing gap identified by the World Bank. To cite an example, India’s 2016 Union Budget was a positive step that focused on the infrastructure sector, including the establishment of a US$3 billion[3] National Infrastructure Investment Fund or the NIIF.

8.         Infrastructure projects are large, lumpy and long in duration. Hence, investors in this sector are attracted to jurisdictions where the regulatory policies are consistent, transparent and fair. Coordinating policies across the different domains of taxation, investment promotion, finance and trade is crucial to ensuring policy certainty. A liberal FDI policy must be complemented by appropriate taxation policies to compete successfully for foreign investments that will always seek out the most attractive opportunities and investment destinations. Mitigating risks, such as costs incurred by project overruns due to legal issues, political instability and currency volatility, is necessary to ensure the continued bankability of projects and sustain the confidence of institutional investors.

9.         Government to Government agreements can also help to boost confidence in, and the attractiveness of, a particular state as an investment destination. In that regard, Singapore has developed close ties with our partners in South Asia through agreements that facilitate market access to various sectors, and promote investments from Singapore. For example, we have a Comprehensive Economic Cooperation Agreement with India and will be launching negotiations for a modern, comprehensive and high quality Sri Lanka-Singapore Free Trade Agreement. We have also put in place Bilateral Investment Treaties (BITs) and Avoidance of Double Taxation Agreements (DTAs) with our South Asian partners, all of which serve to make investment opportunities in South Asian countries more attractive to investors in Singapore. This network of economic connectivity agreements is an important foundation on which we can build infrastructure activity and deepen economic activity between Singapore and South Asia, in particular countries like Sri Lanka and India.

10.       The future of infrastructure investment in South Asia is thus ultimately dependent on two key factors. Firstly, the competitiveness and coherence of a country’s policies; and secondly, a conducive and predictable regulatory environment for businesses and investors to have the confidence to commence large scale infrastructure projects that could take many years to generate the expected returns.

11.       To foster such an environment, we need regular and deep dialogue between government leaders, policy makers, investors and infrastructure companies. In that regard, I would like to take this opportunity to encourage government officials, investors and companies to participate in the Asia-Singapore Infrastructure Roundtable that will be held in October later this year. This annual event is organised by International Enterprise Singapore, and it provides an excellent opportunity to meet and exchange views with developers, financiers, consultants and project sponsors in Singapore and around the region.

12.       This Third South Asian Diaspora Convention is another occasion to do so. It presents a unique opportunity for industry players and other stakeholders to hear directly from government leaders on their economic plans and policy priorities. I would like to thank the Institute of South Asian Studies for organising this convention, and wish everyone a productive session ahead. Thank you very much.

[1] www.worldbank.org/en/region/sar/publication/urbanization-south-asia-cities
[2] https://www.pwc.se/sv/offentlig-sektor/assets/capital-project-and-infrastructure-spending-outlook-to-2025.pdf
[3] Initial corpus by the Government of India