Opening Address by Mr Lee Yi Shyan, Minister of State, Ministry of Trade and Industry, at the Japan Investment and Business Symposium on 1 November 2006 at 9.15 am at InterContinental Hotel, Singapore
Mr Takashi Saito, Executive Vice-President of JETRO
Mr Yoshichika Terasawa, Managing Director of JETRO Singapore
Mr. Kazuhiko Bando, Deputy Director-General, Trade and Economic Cooperation Bureau, Ministry of Economy, Trade and Industry
Mr Katsuhiko Umehara, Mayor of Sendai City
Mr Chong Lit Cheong, CEO, International Enterprise Singapore
Distinguished Guests,
Ladies and Gentlemen,
Good morning,
Introduction
At his recent policy speech, Prime Minister Abe outlined his vision for Japan. One of the four definitions stated by Prime Minister Abe in his strive to create “a beautiful country, Japan”, is that she continues to possess the vitality to grow towards the future. Prime Minister Abe also mentioned that he will work towards channeling new vitality to the Japanese economy through the power of innovation and openness. We are therefore encouraged and also look forward to working with Japan more closely.
Our Economic Relationship with Japan
Japan and Singapore share close economic ties. In 2005, Japan was Singapore’s sixth largest trading partner. In the same year, Japan was also Singapore’s seventh largest export destination and fifth largest source of imports. Bilateral trade stood at S$52.9 billion, up from S$51.8 billion the year before, making this the fourth consecutive year of growth[1].In 2005, Singapore was one of Japan’s biggest Asian investors, with US$746 million worth of direct investments. Conversely, we also attracted US$697 million worth of direct investments from Japan.
Growing Existing Sectors and Creating New Presence
Singapore companies have made good progress doing business with Japan in traditional sectors such as electronics and precision engineering, which includes consumer electronics and automotive components. To cope with cost pressures from global competition, Japanese companies are increasingly doing procurement and outsourcing. This development has created good opportunities for partnerships between Japanese and Singapore companies.
Singapore companies are able to offer cost advantages with their established manufacturing presence in the region such as China, Indonesia, Malaysia, Thailand and Vietnam. However, their strength is not just in lowering production cost, but in providing value-added services such as design, to the entire value chain. They can work with local operators of Japanese plants based in these countries to offer their design solutions. Singapore-based precision engineering company, Rayco, is one example. It has taken the opportunity to serve such Japanese clients by setting up operations in third countries such as being located in Wuxi, China.
In the longer-term, Singapore companies’ unique ability to value-add can grow to become a competitive advantage for Japanese companies. By raising the level of technology and skill competencies, Singapore companies can offer higher value-added services in areas such as research and new product development. An example of a Singapore company doing that is Ellipsiz Ltd, a local service provider to the global semiconductor and electronics industry. Ellipsiz has recently acquired an equity interest in Kita Manufacturing, a company incorporated in Japan and whose principal activities are in the design and manufacturing of spring pin contact probes and other precision metal parts for the semiconductor and PCB assemblies industry. Through this investment, Ellipsiz believes that Kita Manufacturing’s precision engineering expertise in contract probes will be synergistic with the company’s PCBA test and inspection business.
Singapore services companies making good progress in Japan
Singapore companies in the services sector such as those in food, spa and retail, are also making good progress in Japan.
Two positive trends in the Japanese market are helping to facilitate the entry of our services-based companies. First, with the affluent Japanese being well travelled and increasingly exposed to different cultures internationally, they have developed a taste for unique products and services from Asia and Singapore. Second, the continuous recovery of the Japanese economy, now in its 54th month, is leading to increasing consumption expenditure. Robust output growth is projected at 2% to 3% in the medium term[2] and this is boosting consumer confidence and spending on consumer-related products and services.
With this development, Singapore food is enjoying warm reception in Japan. At the Aichi World Expo last year, the food prepared by a team of Singapore chefs was a big hit at the Singapore Pavilion, which reportedly drew 17,000 visitors a day. More recently, at the Singapore Food and Cultural Festival held in Tokyo in April 2006, Japanese consumers were very receptive to the food concepts of our companies such as Kriston and Ya Kun. Encouraged by this success, Kriston and Ya Kun have progressed to open their first food outlets in Japan at the prestigious Lalaport Toyosu development in Tokyo Bay last month. Lalaport Toyosu is one of the largest retail and entertainment development projects in Metropolitan Tokyo. I have been told that since the opening, the response to the Singapore food served at Kriston’s outlet has been excellent. During the weekends, more than 300 bowls of laksa were sold to enthusiastic shoppers and visitors to the Food Circus food court each day.
Similarly, our spa companies such as St Gregory Spa, Banyan Tree, Cosmoprof International and Essence Vale have been making steady progress in the Japanese market. They have established outlets not just in Tokyo alone, but also in Yokohama and Miyazaki.
Singapore-based services companies possess competitive advantages when expanding into the Japanese market. They have unique selling points such as quality, hygiene, design, taste and different choices that cannot be found in the market. Given their multi-cultural and contemporary concepts, our companies can broaden and complement the lifestyle choices available to the Japanese consumer. In doing so, they can create niche markets for themselves.
It is therefore apt that the symposium today has chosen to focus on the theme of “New Consumer Generation, New Opportunities". According to Euro monitor 2004, the value of Japan’s consumer food services market was worth about 20,857 billion yen (S$280 billion) in sales in 2003.The Japanese spa market is also estimated to be worth US$4 billion in the coming decade. The lifestyle services sector therefore presents great potential for Singapore companies.
I encourage our companies to tap on the services and strong network provided by promotional organizations like IE Singapore and JETRO as you target the attractive business opportunities that presently exist in the Japanese market.
Other Collaborative Possibilities
The business collaboration and goodwill built up between Singapore-based companies and their Japanese counterparts need not be restricted to just Japan and Singapore, but also in expanding into third markets in the region.
As a partner for Japanese companies, Singapore’s value proposition lies in our language capabilities, business experience and domestic stability. For example, Singapore can be the bridge in language gap between Japanese companies and the upcoming economies of China and India. More than a translation of words, it transcends deeper to understanding the cultural factors of such countries. Our Japanese partners can therefore work with us and use Singapore as a base for expansion into the region, tapping on the benefits of the Free Trade Agreement network currently enjoyed by companies based in Singapore.
Conclusion
Doing business in the world’s second largest economy will require patience and perseverance. The Japanese look for strong and long-lasting relationships with their potential partners. The success stories of our companies who have done well in Japan are a good source of learning for doing business well in that market.
As we celebrate the 40th anniversary of diplomatic ties between Japan and Singapore, and welcome a new era of leadership under Prime Minister Shinzo Abe, Singapore looks forward to building long-lasting bonds with Japan that will bring about economic benefits to both countries.
I wish you all a fruitful seminar this morning. Thank you.
[1] Source: IE Singapore.
[2] Source: OECD Economic Outlook No. 79 – Japan.