Speech by Nee Soon GRC MP Henry Kwek at the Asia Economic Forum 2017
BRI: the Next Great Wave of Globalization for the Region
The BRI is one of the largest stories in the world today. And rightfully so. There is a lot of attention, from the international media, on the infrastructure projects with hefty price tags.
This has people asking, is the BRI solely an infrastructure play for emerging economies? What is the role for Singapore, a developed economy with a readymade base of infrastructure? What they are really too polite to ask is:
(1) what is the precise business case for Singapore to be involved in BRI, and
(2) what is Singapore economic playbook for the BRI?
Today, I would like to share my personal viewpoints on this matter. And that is:
(1) Singapore is a vested interest party to the success of the BRI;
(2) Singapore is ready to serve the growth that BRI brings, and
(3) Singapore’s economic strategy evolves with the changing world.
Part I: BRI is a Core Economic Interest for Singapore
Let me touch on the initial point – that Singapore is a vested interested party to the success of the BRI.
Let me set the context. BRI is a blueprint of prosperity shared by many countries. If the major powers can negotiate the geopolitical sensitivities, it could unleash the biggest wave of globalization the world has ever seen. Infrastructure is the logical first step. But trade and commerce would quickly flow.
Now that we have stated the context for BRI, where does Singapore currently stand?
The answer is clear – within the BRI region, the economic bond between China and Singapore is already one of the deepest. China’s investment to Singapore represents 33% of all outbound investments to the BRI region. Singapore’s investment to China represents 85% of all inbound investments from the BRI region to China.
Therefore, given the depth of China and Singapore economic relationship, it is only natural that Singapore is and will continue to be deeply involved in the BRI, which is put forth and ignited by China.
I would like to put the same point from a second perspective. Let us take a look at the projected growth of the major building blocks of the world. EU and US will continue to be significant in the world economy, and will continue to grow. ASEAN is also growing steadily, although from a much more modest base. China is quickly becoming the biggest player in the world economy, not just in PPP, but also nominal terms.
So what is the future of ASEAN’s growth? If BRI succeeds in comingle the economic energies of China, Eurasia, central Asia, and SEA, all within the context of regional peace and stability, then ASEAN’s growth can only grow in one direction. And that is up. And that benefits Singapore.
Now let us arrive at the same conclusion using a third set of data. Here’s the Post-2010 regression data from the Asian Competitiveness Institute. In this chart, it shows the impact of one percent growth of these economies to Singapore’s economic multiplier. In layman’s terms, it identifies which countries are the growth drivers of Singapore’s economy.
Today, Singapore still relies on OCED countries for our economy. But if you band China, SEA, and India together, they play an important role to our economy already.
As BRI catalyze the growth of these countries, China, SEA, and India (whom hopefully will join BRI) will contribute even more to Singapore’s future prosperity. Therefore, looking at the data, the business case for Singapore to be involved in the BRI is crystal clear. In fact, I believe that BRI is one of Singapore’s core economic interests.
Now, all these talk about future growth is good, but only if Singapore can ride on the growth wave. The BRI will bring forth both win-win ollaborations and zero-sum competition. Singapore, as small city-state, must continue to earn our relevance. At the keynote speech yesterday, Minister Shanmugam mentioned the book “Who Moved my Cheese”. I am happy to share that many of us in Singapore have read the book, and have fully internalized what the book says.
So that brings me to the second part of my presentation – that Singapore is ready to serve the growth brought forth by BRI.
Part II: Singapore is Ready to Serve the BRI Region
Before I start on the second part of my presentation, let me share on the uniqueness of the Singapore economy.
(1) Looking at GDP numbers, Singapore is around the size of Malaysia, Philippines, and just a little behind Thailand. In my view, this GDP number perhaps underestimates the role that Singapore play serving the region. This is because unlike most of ASEAN, the vast majority of our GDP is geared not to serve our small population, but to contribute to the region.
(2) The other unusual aspect of the Singapore economy is that we have a unique combination of hubs colocated, within the confines of 720 square kilometers.
Now, let me now quickly share
(1) How Singapore is already to serve the BRI region through different dimensions, and
(2) How we are preparing Singapore for the future regional growth.
Regional Headquarters and Center for Global Manufacturing
Today, we have a unique concentration of global companies from US, EU, and Japan.
Also, the numbers of firms from China and India are going very fast. Leading Chinese companies like Xiaomi, Alibaba, and Haier serve the region out of Singapore.
We are the fourth largest exporter of high-tech products, one of the top 3 integrated petrochemicals hub worldwide, and the third fastest growing pharmaceutical export nation in the world.
International Air Hub
Today, Changi airport is the 6th busiest airport for international arrivals serving more than 58m passengers annual. Singapore is also Asia’s biggest MRO center with a quarter of the total market share. We also have an eco-system of manufacturing, R&D, and aircraft leasing companies.
Looking to the future, IATA forecasts annual air traffic to double to7.2 billion by 2035, and Asia-Pacific aircraft fleet will triple to 13,500 by 2031.In response, Singapore will expand our capacity, and ahead of demand too.
Singapore we will embark on the new terminal 5, and increase capacity to 120M passengers. To put this in context, this will be bigger than Atlanta airport in Georgia USA, the busiest airport today. We are also partnering with China to develop Chongqing as an international air hub, which will benefit Singapore as well.
Maritime Hub in the Straits of Malacca
Today Singapore’s PSA, as the second busiest container port after Shanghai, can handle more than 30M TEU. This is one-seventh of the world’s throughput. Or more than half of the container ships passing through the Straits of Malacca.
OCED believes that worldwide throughput will increase four times by 2030, and Shanghai International Shipping Institute believes that China throughput alone could reach 550M million TEU by 2030. Therefore, our new Tuas megaport will double container handling capacity to 65 million TEUs, by the mid-2030s.
We are also working with China on the “Southern Transportation Route”, from Chongqi to the port city of Beibu in Guangxi. This route is interesting for two reasons:
(1) It is a more direct link between Western China to the coast of China, and it is all within the Chinese soil.
(2) This route can serve as a valuable link between the maritime belt and the overland road.
International Financial Center
Singapore’s status today is the 3rd largest financial center, and the 3rd largest offshore RMB center. We are also supportive of efforts to nternationalize RMB.
Moving forward, Singapore will:
(1) Strive to be a global center for Fintech Innovation, and
(2) Partner with Chongqing as the dual financial gateway serving Western China and SEA.
Asia’s Centre for Infrastructure Financing
Beyond being an international financial center, Singapore is also strengthening our position as Asia’ center for Infrastructure Financing.
In terms of financing, many of the infrastructures financing players are already here.
This is important. Participation of different types of financiers spread the risk, allows for participation according to different investment mandates, and risk appetites, and allows funds to be recycled more easily.
Singapore-based players know how to do this well. Today, 60% of project finance transactions in SEA are lead-managed by Singapore-based banks.
In terms of Project Structuring, the major multilateral developmental banks – WB, ADB and AIIB are here. And there is depth in their presence. World Bank is a prime example.
The Singapore government is also actively involved in catalyzing project structuring. For example:
(1) Singapore and ADB have started the Asian Infrastructure Center of Excellence (AICOE). This helps governments to identify their needs, and bring the private sector on board.
(2) Singapore is also one of the founding funding partners of World Bank’sGlobal Infrastructure Facility (GIF).This facilitates the preparation and structuring of complex infrastructure PPPs.
In terms of Professional Services, Singapore has a matured eco-system: Engineering for regional infrastructure projects. Our accounting firms, in particular the Big 4.Our law firms have regional practices.
In terms of Dispute Resolution, Singapore can play an important role. Our jurisdiction has a brand name for trust, neutrality, and adherence to the rule of law. Singapore offers the full range of dispute resolution options: arbitration, litigation, and mediation. An interesting statistics is that Chinese and Indian companies are the top 2 users of commercial arbitration services here in Singapore.
Marketplace of ideas and people
Singapore is a marketplace of ideas and people. In Singapore, you can find:
(1) Leaders from many parts of the world passing through, or going through shortstints here, all exchanging ideas on BRI.
(2) Regional think-thanks with many international scholars, and conferences. All these provide varying worldviews of different geographies,
(3) A blend of mainstream and start-up businesses, as well as a mixture of businesses from Asia-Pacific, and beyond.
On top of this, Singapore is a place for talent, because it is the most livable city in Asia outside ANZ, and the best Asian city for expats.
So to sum up, Singapore is already serving the BRI region. We are also implementing on our plans to grow our capacity and capabilities, as BRI brings more growth.
Part III: Singapore’s Evolving Economic Grand Strategy
Now, let me talk about my third and final point – As the world changes, our economic strategy will evolve with it. Part of our strategy is to transform our economy and improve our capabilities. There are several components to it.
(a) We are making a massive investment in infrastructure, the largest in our history. We are investing in our airport and mega-port. We are investing in railways – both high-speed rails to Malaysia, and 3 major subway lines on top of our existing 5. We are investing in our second Central Business District.
(b) We are sparing no expenses in pushing for innovation, digitization, and building a Smart Nation. We are investing S$19 billion this five years in government-back research. We are developing a major new industrial park, the JID, with innovation built at its heart. We encourage all sectors of the sectors to adopt digital technologies, such as big data, AI, and robotics. We are applying digital technology to better our people’s daily lives, through the Smart Nations initiative.
(c)We are also making a focused transformation effort targeting 80% of our economy. Traditionally, Singapore has a focused industrial strategy for our
manufacturing and exportable services industry covering around 40% of our economy. That will not change. Now, we are adopting the same approach to level up the other 40% of our economy.
(4) We are making our largest ever investment in our people.
1. We are building up a robust system of lifelong education, together with our industries and educational institutes.
a. To us, we have to think beyond arming our people with diploma, degree, or even a PhD.
b. We have to equip all of our people in every sector, on a life-long basis, with industry-relevant, bite-size, just-in-time courses.
2. We are strengthening the educational link between passion and vocation. Because passion is necessary for mastery of any skills, which in term, determines how far they will go.
b. The second part of our economic strategy is to continue to be useful, even essential, to the world. This means we must continue to punch above our weight
i. In areas such as finance, maritime, air transportation, technology, and petrochemicals.
c. This also means we must continue to attract a strong business presence from all major powers, both existing and emerging.
d. Doing useful things, and rooting international businesses to Singapore, allows us to intertwine our economic interest with all major powers in our region.
e. This interconnectedness with the major powers, and the world, creates a valuable backstop for Singapore’s economic security.
2. I would conclude my speech today with the following:
a. In my view, Singapore supports the Belt and Road Initiative because it is one of our core economic interests.
b. And we stand ready to contribute to it, both today and tomorrow.
c. Mr. Lee Kwan Yew once reminded my fellow Singaporeans that, “Nobody owes us a living”.
d. This is a point we do not forget as Singapore evolves our economic grand strategy.
i. Leveling up our economy for future opportunities such as BRI,
ii. And intertwining the economies of major powers with ours,
iii. Are the best guarantees of Singapore’s economic future, for the next 50 years.
3. Thank you.