20 June 2014
The Singapore International Chamber of Commerce Annual General Meeting – Speech by Deputy Prime Minister, Coordinating Minister for National Security and Minister for Home Affairs, Mr Teo Chee Hean
“Economic Opportunities and Challenges for Singapore in a Growing Asia”
Mr Rolf Gerber
Chairman of the Singapore International Chamber of Commerce
Ladies and gentlemen
1. Good afternoon. I am happy to join all of you at the Annual General Meeting of the Singapore International Chamber of Commerce. The mix of companies and organisations represented here today reflects the wide range of companies in Singapore – including global corporations, large local companies and SMEs. You have created good jobs for Singaporeans, while using Singapore to reach out to a rapidly-growing Asia.
Rise of the Asian economy
2. The Asian Development Bank estimates that on current growth trends, Asia could comprise more than half of global GDP by 2050.1 The Brookings Institution forecasts that by 2030, Asia will host two-thirds of the global middle class and account for some 60% of global middle-class consumption.2
3. ASEAN, with a combined population of 600 million and combined GDP of close to $2 trillion, will continue to be an important market in Asia. ASEAN has made significant progress towards establishing an ASEAN Economic Community by 2015, with free movement of goods, services, investment, skilled labour, and freer flow of capital. These efforts will make it easier to do business in the region. The High-Speed Rail link between Singapore and Kuala Lumpur, when ready, will also help to bring the region closer together, as part of a vision for rail links connecting the region.
4. Asia’s growth, and the rising affluence of its growing middle class, present immense business opportunities. The increasing sophistication of Asian consumers also requires global companies to better understand customer needs and customise products and services for Asia. For these reasons, we are seeing MNCs expanding their Asian reach, and mid-sized companies making forays into Asia, some for the first time. Fast-growing Asian enterprises are also looking beyond their home countries, to the region, and beyond.
Strengthening our Fundamentals: Trust, Knowledge, Connectivity, Liveability
5. Singapore has been serving as a useful base for global businesses seeking to make inroads in Asia, and the first port of call for Asian businesses looking to grow their global reach. The World Bank has consistently ranked Singapore as the easiest place to do business in the world.3
6. We will continue to build on our fundamentals, but we must also evolve with changing circumstances, to position ourselves where we can add most value. As a maturing economy, we cannot rely on a linear increase in labour, land, or resources such as energy, to grow our economy. To achieve sustainable growth, Singapore will continue to move towards higher value-added activities and innovation. This will help to ensure that our economy remains competitive, so that we can create good jobs for Singaporeans. This is anchored upon four key attributes of Singapore’s business environment – Trust, Knowledge, Connectivity and Liveability.
7. The first attribute, Trust, is embodied in Singapore’s integrity, quality, reliability, rule of law, respect for intellectual property, and our zero tolerance against corruption.
8. In an increasingly volatile world, trust in Singapore’s stable business environment allows companies to make long-term investment decisions. This in turn creates good jobs for Singaporeans and sustainable economic growth for Singapore. For example, our strong intellectual property regime has made us an attractive home for knowledge-intensive economic activities, such as high security chip sets, and pharmaceutical and biologics manufacturing. In less than seven years, Singapore has become home to nine biologics manufacturing facilities, with the three latest investments by Novartis, Amgen and AbbVie totalling more than $1 billion. Over the next three to four years, we expect the biologics industry to continue to grow, creating an additional 700 to 1,000 highly skilled positions such as engineers, biotechnologists, and quality specialists.
9. Singapore’s focus on Knowledge has put us in a good position to serve the diverse needs of modern business. We have invested heavily in education, to provide Singaporeans with the skills, attributes and expertise to succeed in a technology-driven, knowledge-intensive, globally-oriented economy. We work closely with our industry partners to help our workers continually upgrade their skills, so they are ready to take on better paying jobs as new opportunities arise. To make sure that qualified Singaporeans are considered for jobs fairly based on merit, we announced the Fair Consideration framework in September last year. Together, these measures help to strengthen the Singaporean core in our workforce, and provide a stable foundation for long-term growth.
10. At the same time, we remain open to people from around the world to complement our workforce – those who have the right skills, competencies, overseas networks and market knowledge to add new capabilities to our local workforce, as well as those who help make up for the shortfall in certain segments of the labour market. Such a multi-national workforce attracts many companies to set up presence in Singapore, to reach out to other markets in the region and the world.
11. However, there are physical and social limits to how large a foreign workforce we can sustain. In recognition of this, we have slowed down the rate at which the foreign workforce increases, but have not stopped the flow. Excluding foreign domestic workers and construction, foreign workforce growth has halved from 2012 to last year. The year-on-year foreign workforce growth in December last year was 2.3 percent, which is a more moderate and sustainable level than the 4.6 percent the previous year. 4
12. To shift the economy towards higher knowledge and innovation, the Government has invested heavily in R&D, to develop cutting-edge technologies to upgrade existing activities and explore new growth opportunities. For example, through the $500 million Future of Manufacturing initiative, A*STAR and EDB are helping businesses to develop and adopt new technologies in fields such as additive manufacturing, robotics and manufacturing IT.
13. There is one more aspect of Knowledge that may be less apparent. As a multi-cultural, multi-racial nation, Singapore is well-positioned to provide a window from which companies and entrepreneurs can better appreciate the cultural similarities and differences in the region. For example, the Institute on Asian Consumer Insight at the Nanyang Technological University helps companies understand the needs, aspirations and buying decisions of the Asian consumer, so that they can develop better products and services for consumers in this region.
14. Singapore’s logistics, financial and market Connectivity have helped to make us a key hub for ASEAN, Asia, and the world. We continue to strengthen our strong air and sea transport infrastructure. By the mid-2020s, Changi Airport will have a third runway and five passenger terminals, which will double its current cargo and passenger capacity. The Government is also working towards a long-term plan to consolidate our container port activities at Tuas Terminal, which will have a capacity of up to 65 million twenty-foot equivalent units (TEUs) per year, also doubling our current container throughput.5
15. Singapore is also home to over 200 banks, a growing number of which service their regional activities out of Singapore. Companies in Singapore have the whole range of financial services to facilitate their local and regional growth. Since the appointment of a Renminbi Clearing Bank in February 2013, Singapore has overtaken London to become the second largest RMB clearing centre in the world, after Hong Kong. With greater RMB liquidity in Singapore, companies can also tap on a wider range of RMB products and services that meet their financing, investment and risk management needs.
16. All these aspects of connectivity help companies serve the region better and more cost-effectively. Executives have numerous flights to choose from, allowing them to save valuable time. Our TradeNet and PortNet facilitate just-in-time, air and sea freight supply chain fulfillment, lowering transport costs and time to market. Companies can access the full suite of business services locally to support their diverse regional and international needs.
17. Singapore has also established strong trade links with the world. Our network of trade agreements is the most extensive in Asia, with 18 Free Trade Agreements, 36 Investment-Guarantee Agreements and 69 Double Taxation Agreements. This network enables companies based in Singapore to access key markets and capitalise on growth opportunities overseas.
18. Today, there are some 60,000 foreign companies registered in Singapore, 6 including 6,000 from India, 7,000 from China, 4,000 from Japan, 12,000 from Europe, and 4,000 from the US. We continue to welcome people and companies to Singapore to make connections and form linkages with people and companies from other parts of the world, sparking new ideas, and creating new opportunities.
19. As interest in Asia grows, we hope to see more global players and Asian enterprises including home-grown companies using Singapore as a base to expand beyond their home markets, and seize growth opportunities in Asia.
20. Singapore also has much to offer in terms of Liveability. Singaporeans and foreigners alike appreciate our safe streets, good schools, clean and green environment, good quality of life, and increasing cultural vibrancy – shopping and dining, nature attractions, integrated resorts, major sporting events, and more.
21. We have always placed strong emphasis on maintaining a high-quality and sustainable way of life. Like all major cities such as London, Hong Kong, Tokyo or New York, good public transport has to be the main mode of travel. Between now and 2030, we will rapidly expand our rail network, doubling the network length from today to some 360km. Our rail network density will then be comparable to New York and London’s today. We have recently announced changes to restructure our bus industry to promote greater competition and efficiency. A combination of restraints on the growth of vehicle numbers and innovations in car travel will provide new options for more efficient car sharing and use that will permit us to have smooth-flowing traffic on our roads.
22. We have also taken significant measures to ensure that Singapore remains a competitive location.
23. To help ensure that industrial and commercial land costs remain competitive, the Government has released a significant amount of land in recent years. For example, about 28 hectares of land were sold through the Industrial Government Land Sales programme every year between 2010 and 2013. This is more than double the annual supply between 2005 and 2009.
24. The new industrial and retail space coming on-stream in the next three years provides new supply that is double the average demand over the past three years.7 This strong upcoming supply of industrial and retail space will give businesses more options and ample space to expand their operations in Singapore8. By end 2016, we expect prime office space in the core business areas to increase by about 13%, compared to the current stock.9 Prices and rentals of private residential properties have levelled off since the last quarter of 2013. 10
25. The Government will also continue to ensure that businesses have access to competitively-priced energy. We are liberalising the electricity retail market to allow more businesses to choose the retail package that best suits their needs.11 In addition, the opening of our Liquefied Natural Gas (LNG) terminal last May has allowed Singapore to buy gas from around the world and obtain more competitive prices. The greater availability of natural gas has also facilitated the building of more gas-fired power plants. This has increased Singapore’s overall generation capacity, which has led to downward pressure on electricity prices. 12
26. Singapore intends to remain one of the key global nodes for doing business, riding on opportunities provided by a rising Asia.
27. We will continue to strengthen our fundamentals, and maintain a conducive business environment based on Trust, Knowledge, Connectivity and Liveability. Companies can enjoy the synergies of a total system that works efficiently, predictably, and effectively, thereby lowering the overall costs of doing business.
28. We will continue working in partnership with the members of Singapore International Chamber of Commerce to grow your companies’ presence in the region. Together, we can achieve win-win outcomes for your companies, Singaporeans and Singapore, as well as the region.
29. Thank you.
2 Homi Kharas and Geoffrey Gertz, “The New Global Middle Class: A Cross-Over from West to East”, 2010. (http://www.brookings.edu/~/media/research/files/papers/2010/3/china%20middle%20class%20kharas/03_china_middle_class_kharas.pdf)
3 World Bank, “Doing Business 2014”, October 2013.
4 Ministry of Manpower, “Labour Market 2013”, 14 March 2014. (http://stats.mom.gov.sg/Pages/Labour-Market-Report-4Q-2013.aspx)
5Maritime Port Authority, “Singapore’s 2013 Maritime Performance – Port of Singapore Registers Good Growth in 2013”, 7 January 2014. Container throughput hit 32.6 million TEUs in 2013.
6 Data from Accountancy and Corporate Regulatory Agency’s company registration information. The 60,000 companies are those with more than 50% foreign capital share. Some of these companies may not be in operation currently.
7 An average of 600,000 square meters of new multiple-user factory space and 145,000 square meters of new shop space will become available each year for the next three years.
8 Industrial space rentals have already started to moderate. For multiple-user factory space, rents rose by 3.5% over the whole of 2013, which is significantly less than the average increase of 10% per year for the past four years. For retail, overall rental increases have been moderate over the past years, with the URA retail rental index showing a 1.1% increase per year from 2009 to 2013.
9 This is within the Downtown Core and Orchard Planning Areas.
10Prices and rentals of private residential properties have declined across the board since 4Q 2013. In 1Q 2014, private residential prices fell by 1.3%, while rentals decreased by 0.7%. These were greater than the previous declines of 0.9% and 0.5% respectively in 4Q 2013.
11 Previously, only big electricity consumers who used more than 10 megawatt-hours (MWh) per month could choose their electricity retailer. This threshold was lowered to 8 MWh in April, and will be further lowered to 4 MWh on 1 October this year.
12 Global fuel price movements are the main determining factor in our electricity prices as fuel remains the largest cost component of Singapore’s electricity. Nonetheless, the increase in generation capacity since 2012 has contributed to a 22% fall in average electricity pool price from 2012 to 2013, on the back of a 6% decrease in natural gas prices.