Speech by Mr S Iswaran, Minister, Prime Minister’s Office and Second Minister for Home Affairs and Trade & Industry at the European Chamber of Commerce Europe Day Celebration Luncheon on Wednesday, 9 May 2012, 1330 Hrs at Shangri-La Hotel

Your Excellency Marc Ungeheuer, Ambassador and Head of the Delegation of the European Commission to Singapore,

Mr Stefano Poli, President of EuroCham,

Excellencies,

Distinguished Guests,

Ladies and Gentlemen,

Introduction

1              I am very happy to join you today at this luncheon to celebrate “Europe Day”.  On 9 May 1950, then French Foreign Minister, Robert Schuman, unveiled his visionary Declaration, a bold and revolutionary idea which laid the foundations for the emergence of a united and more prosperous Europe.  From its modest beginning with 6 signatory members, the Union has evolved to be the largest trading bloc in the world, comprising 27 countries which are amongst the most advanced in the world.

In times of economic uncertainty, the EU solidarity and strong political will remain key to putting the global economy back on firm recovery.

2              The values and aspirations espoused by the Schuman Declaration resonate even today - despite, or perhaps because of, the challenges the EU faces today - high sovereign debts in some member countries and the uncertain economic outlook with the risk of recession in 2012.  This may have taken some of the “shine” off Europe in recent times, but the foundations of shared values and common purpose on which the EU was built remain a compelling proposition.

3              As the largest consumer market, the EU’s economic recovery will impinge significantly on global economic prospects.  The world will look to the European leaders’ solidarity and resolve to contain the problem.  In Schuman’s words, “it is no longer a time for vain words, but for a bold constructive act.”

4              Recent debates and election campaigns in the EU have elicited calls for a shift from a “fiscal compact” towards a “growth compact”.  To successfully emerge from these choppy economic waters, growth must complement any austerity measures.

5              The EU’s economic success in the last half century was built on the fundamental principles of market liberalisation and integration.  The benefits of a unified market and a single production base allowed the EU to pool your strengths and resources to economic advantage.  In the current context, it is imperative that the EU look outward and seek growth opportunities in new markets, even as member countries undertake essential internal structural adjustments.

Asia’s growth provides economic opportunities and a growth market for European companies to tap on

6              One such opportunity lies in Asia, where the long term economic outlook remains positive notwithstanding the current uncertainties in the global economy.  We are familiar with the growth stories of China and India.  According to Goldman Sachs, at the current GDP growth rate (9.2 per cent in 2011), China is expected to add the equivalent of Germany’s GDP between 2010 and 2015.

7              It is therefore not surprising that many European companies have been “looking East” for their growth strategy.  One in every five dollars of EU exports is to Asian markets.  From 2007 to 2010, EU’s trade with Asia grew by 10.5 per cent, from US$1.1 trillion to US$1.2 trillion.

8              It is, however, noteworthy that in the same period, intra-Asian trade has grown three times as fast - at 30.4 per cent from US$1.9 trillion in 2007 to US$2.5 trillion in 2010[1].  This is one measure of potentially untapped opportunities for European companies.

9              The growing middle class, higher disposable incomes, and rapid urbanisation have and will significantly increase Asia’s share of the global market.  Asians are expected to double their level of consumption over the next 10 years to reach US$8.6 trillion by 2020[2].  With increasing affluence, we can expect a surge in Asia’s demand for high-end goods and services, which are areas of traditional strengths for European companies with their well known emphasis on technology, quality and design. Let me cite some examples.

              i.                 Luxury Goods: Asia will see 3.2 billion people move into the middle class by 2030 (up from 525 million in 2009) and account for nearly 60 per cent of total global consumption by 2030[3].  Asia will also account for more than 80 per cent of the growth in global middle class spending by 2030, amounting to US$55 trillion (from US$21 trillion in 2009[4]).  This represents a sizeable potential market for Europe’s high end luxury goods.

 

             ii.                 Automobile: In the automotive sector, Asia is expected to account for 40 per cent of the growth in global car sales over the next 5 to 7 years.  Total sales in China alone are expected to exceed 30 million units by 2020.  Vehicle demand in Indonesia, Malaysia, and Thailand is also expected to expand at 10.5 per cent per year from 2010 to 2020[5].  (Coupled with the growing population of Asian millionaires, which is expected to double to 2.8 million with a net worth of almost US$15.81 trillion by 2015[6].)  Highend cars, in particular, are expected to see a strong increase in demand.  China is already one of the largest consumers of performance and sports cars.  For example, Ferrari posted a 77 per cent increase in sales in China last year, while sales of BMW surpassed 75,000 units in the first quarter this year, representing a growth of more than 28 per cent from a year ago[7].  

            iii.                 Healthcare: The changing demographics (ageing and greater middle class spending on healthcare) result in a higher demand for quality healthcare and pharmaceutical products.  Pharmaceutical sales in Asia have more than doubled from US$97 billion in 2001 to US$214.2 billion in 2010.  Sales are expected to hit US$386 billion by 2016, reflecting a compounded annual growth rate of more than 13 per cent over the next 5 years[8].

Strong economic impetus for ASEAN to push ahead towards greater regional integration

10            ASEAN remains an integral part of this growth story.  Situated between China and India, with a population of nearly 600 million people, ASEAN has a growth potential that cannot be ignored. ASEAN’s 10 members countries have a sizeable combined GDP of US$1.8 trillion (a tenth that of the EU) which is forecasted to grow at more than 5 per cent annually in the next 4 years[9]. 

11            ASEAN recognises that economic integration is an imperative in order to remain competitive.  The economic grouping has made important strides towards the creation of a single market and production base, and is pushing ahead to realise its ambitious vision of an ASEAN Economic Community (AEC) by 2015.  At the same time, ASEAN already has FTAs with six of its dialogue partners, namely Australia, China, India, Japan, Korea and New Zealand.

12            To work towards greater regional integration, ASEAN is now embarking on the Regional Comprehensive Economic Partnership (RCEP).  The RCEP will see ASEAN more closely linked to its dialogue partners which will further enhance the economic potential of the region.

As a Global-Asia hub, Singapore remains the gateway to Asia for many global companies

13            Singapore is fortunate to be located at the heart of this region of growth, serving as the gateway of choice for global players seeking to tap into the opportunities offered by a rising Asia.

14            Many EU companies have located their manufacturing and R&D “control tower” and “C-suites” operations in Singapore to oversee their business in Asia.  Some recent additions to the more than 8800 European companies in Singapore include Rolls Royce’s S$700 million “Factory of the Future” in Seletar Aerospace Park and GSK’s Academic Centre of Excellence specialising in innovative medicine.

15            Singapore is also consistently seeking to partner the EU in new and emerging sectors such as (i) urban solutions, (ii) clean technologies, and (iii) renewable energy.  Examples of key initiatives in new sectors include the island wide trial of next generation electric vehicle between Energy Market Authority (EMA), Land Transport Authority (LTA), Economic Development Board (EDB) and European automotive companies such as Renault and Daimler.  Siemens has also set up a Global Water Technology Research Centre to develop next generation water and wastewater.

16            But, to effectively tap into the Asian market, European companies need an Asian strategy in terms of product design, development and marketing.  Asia is a diversified market comprising many unique cultures and customs.  Companies need to be “in Asia for Asia” to respond to fast-changing consumer habits, to customise and even to develop products to suit Asian preferences and needs.

17            Singapore can serve as the ideal outward looking pan-Asian hub.  Our research institutes collaborate with industry to create new intellectual property.  Our IPR regime is robust in safeguarding economic interests.  To meet the increasing need to understand the Asian market, the EDB and NTU jointly launched the Institute on Asian Consumer Insight less than two months ago (30 Mar 2012).

Singapore is a natural catalyst for greater region-to-region integration between EU and ASEAN

18            Ultimately, untrammelled economic connectivity is key.  Hence, as a small and open economy, Singapore is a staunch advocate of free trade and greater engagement across regional blocs.

19            The US has signalled its intention to step up its engagement of Asia.  President Obama has called this America’s Pacific Century.  Secretary of State Clinton has articulated the US’ diplomatic pivot towards Asia-Pacific.  Singapore and the US, along with 7 other Asia-Pacific countries are negotiating the Trans Pacific Partnership as a potential nucleus of a high ambition FTA of the Asia-Pacific.  This FTA will see economies on both sides of the Pacific more closely integrated.

20            The EU too must continue to be firmly engaged in this region, for both strategic and economic reasons.  And, Singapore is a natural partner for the EU’s deeper engagement of this region.  Despite our relatively small population, Singapore is the EU’s 13th largest trading partner globally.  Singapore constitutes close to 40 per cent of EU’s exports to ASEAN.  Singapore is the top investment destination for the EU within ASEAN (and conversely the largest ASEAN investor in the EU accounting for more than 95 per cent of the FDI stock from ASEAN into the EU). Out of all Asian FDI stock in the EU, Singapore ranks second, just behind Japan and ahead of China.

21            It is a natural extension of this deep and broad economic engagement, that the EU has chosen Singapore to be the first country in ASEAN to pursue a bilateral FTA.  Once concluded, the EU-Singapore FTA will herald a new chapter in our bilateral relations.  The EU-Singapore FTA will further strengthen our close bilateral economic ties, provide new opportunities for businesses and consumers, and contribute to growth in our respective economies.  The more than 8800 European companies and businesses in Singapore will be among the biggest beneficiaries of the EU-Singapore FTA.

22            The EU-Singapore FTA is entering the final stages of the negotiations.  Both sides remain firmly committed to conclude the negotiations soon.  Singapore's strong interest in concluding an FTA with the EU signifies our confidence in the EU’s future.  The EU-Singapore FTA will also send a strong signal of the EU’s commitment to step up its engagement of the region at a broad strategic level. Notably, the EU-Singapore FTA can serve as a pathfinder FTA that will be a building block for a larger EU-ASEAN FTA.

23            We are confident that with this first step towards greater market liberalisation, we will see the potential synergies between the two regions realised fully.

Conclusion

24            The path ahead is fraught with challenges, domestic and external, stemming from the uncertain global economic environment.  Europe’s recovery will be key to reducing that uncertainty.  We remain hopeful that today’s European leaders will resolve these challenges with the same vision, the same dedication to progress, and the same sense of purpose as Schuman and other founding fathers of the Union.

25            I would like to thank the EuroCham and EC Delegation in Singapore for your strong support and continued efforts in building an ever closer relationship between the EU and Singapore.  We look forward to further collaborations and partnerships between the companies from both regions.  Let me wish everyone a happy “Europe Day” and extend my warmest congratulations to the EU on the 62nd Anniversary of the Schuman Declaration.

Thank you.

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[9] OECD Development Centre, “Southeast Asian Economic Outlook 2011/12”