SPEECH BY MR LEE YI SHYAN, MINISTER OF STATE, MINISTRY OF TRADE & INDUSTRY, AT THE FRANCHISING AND LICENSING ASSOCIATION (FLA) AWARD 2006 GALA DINNER ON 1 NOVEMBER 2006, 7.30 PM AT MARINA MANDARIN

Distinguished guests,

Ladies and gentlemen,

Good evening.

Introduction

Tonight, Singapore plays host to the world’s first international franchising awards. Organized by the Franchising & Licensing Association (FLA) of Singapore, the International Franchising Award 2006 will feature the best of the franchising industry from Singapore and countries around the world. I will like to commend FLA Singapore for this initiative.

Rising Franchising Industry in Asia

The franchising industry in Asia is taking off and the statistics are telling. According to a report by Academy Asia Pacific, the annual revenue from Asia’s franchise markets is growing by more than US$50 billion annually. In five years’ time, annual growth will hit US$100 billion. The rapid growth is underpinned by the large and relatively undeveloped franchise markets in the region. As a comparison, while the US market is growing by 5% each year, the Chinese and Indian markets grow by 40%.

Singapore is also part of this enormous growth story. The sales turnover of Singapore-based franchises already exceeds 15% of the total domestic retail sales volume. We expect this number to continue growing as we see more homegrown franchises emerge. Over the past ten years, homegrown franchise concepts more than doubled from 85 in 1995, to 190 in 2003.More than half of these have already expanded overseas, and even more are expected to follow in their footsteps.

IP is the Key

It is evident that many companies and entrepreneurs are increasingly turning to franchising to take advantage of the region’s rapid economic growth. Many companies have built up valuable proprietary knowledge in the form of trademarks, brands, technology or even a proven method of doing business – in short, their intellectual property. For these companies, franchising is an effective business strategy that allows them to capitalize on their IP to expand into new markets quickly or accelerate their penetration into existing markets. Entrepreneurs, on the other hand, see franchising as a way to tap on this tried and proven IP to jumpstart their dreams of running successful businesses. To both parties, franchising enables them to achieve their business goals while minimizing risk.

Successful franchisors, as tonight’s Award attests, share a common feature. Through franchising, they are able to manage and extract commercial value effectively from their IP. This is not unique only to Singapore or the region. According to LICENSE magazine, retail sales of licensed merchandise worldwide reached US$175 billion. Another study estimates US$6 billion in licensing royalties in the US alone for 2005.

However, the criticality of IP to a successful franchisor means that the sound IP management is a key business concern. If your IP is not properly managed, your franchisees may misuse your IP or your competitors may copy and cannibalize your business. To protect your valuable IP, Singapore is the ideal base because of our strong IP infrastructure. We provide strong support for you along the entire IP value chain. You can file for global IP protection here because we are a signatory to major IP conventions and treaties. To encourage IP innovation and management in Singapore, the financial treatment of IP has been rationalized. And should someone contravene your IP, our strong legal infrastructure will allow you to defend and assert your rights vigorously.

With these measures in place, it is no wonder that many studies rank Singapore highly. Over the past few years, the Political Economic Risk Consultancy (PERC), the World Economic Forum (WEF) and the Institute for Management Development (IMD) have consistently recognized Singapore as the best place in Asia for IP protection. Companies are therefore increasingly using Singapore as a base to manage their IP. In the past five years, the number of trademarks registered through Singapore as the office of origin has almost tripled. Global Brands, which manages the rights for FIFA, the PGA Tour and Disney, recently relocated its global HQ from London to Singapore so as to better partner licensees and retailers in the region to capitalize on its IP portfolio.

Beside a strong IP infrastructure, Singapore also offers a conducive business environment through its pro-business orientation and established financial sector. In fact, Singapore is ranked by the World Bank to be the easiest place in the world to do business. Within Asia, Singapore is an excellent place to base your business because of its location and extensive connectivity, which enables you to reach over half the world’s population in seven hours. Many local and overseas companies indeed choose to use Singapore as a base to seal franchising and licensing deals for the region. They are also well-supported by the increasing numbers of professional licensing agents in Singapore that specialize in brand licensing.

Recent entrants that have chosen to base their businesses in Singapore include Carl’s Junior, Ben & Jerry’s, Gloria Jeans and Contour Express. These are but some of the many companies that appreciate the value of using Singapore as a launch pad to expand their businesses to the region. With our strong value proposition, I am confident many more will follow in their footsteps and set up their businesses here.

Conclusion

The franchising industry in Singapore will continue to flourish and grow in the years to come. Once again, I will like to commend FLA Singapore for organizing tonight’s Award. I will also like to congratulate the deserving winners.

Thank you.