OPENING ADDRESS BY MR LIM HNG KIANG, MINISTER FOR TRADE AND INDUSTRY, AT LATIN ASIA BUSINESS FORUM 2012, ON WEDNESDAY, 3 OCTOBER 2012, 10.05AM, RAFFLES CITY CONVENTION CENTRE SINGAPORE
Your Excellencies,
Distinguished Guests,
Ladies and Gentlemen,
Good morning. It is my pleasure to join you today at the Latin Asia Business Forum today. I am happy to see such a strong turnout. Your presence reflects the ever-growing ties and partnership between our two regions.
Introduction
Global economic growth has been weak this year. Fortunately, Asia and Latin America remain bright spots. Both our regions are expected to grow at over 4 per cent1, which is more than double the rate of Europe and the US in the next three to five years.
Asia and Latin America share similar characteristics. Both our regions are supported by large domestic populations and fast expanding middle classes. Our regions are also experiencing rapid urbanisation and industrialisation. Governments in our two regions are making significant investments to develop their infrastructure and are keen to attract more investors.
Importance of trade
Trade continues to be a powerful engine of growth, within and between our two regions. In terms of regional trade, intra-Asia trade has grown at a compounded annual growth rate (CAGR) of 12.8 per cent, and intra-Latin America trade at CAGR of 9.7 per cent. The growth rate of the world’s trade over the last five years2 stood at 6.6 per cent and therefore both our regions have far exceeded that.
Trade ties are also deepening between Asia and Latin America. Trade between our two regions grew 355 per cent between 2000 and 20103, reaching US$442 billion in 20114. According to the Asian Development Bank, Asia is now Latin America’s second largest trading partner at 21 per cent, second only to the US5 and higher than EU6.
Within Asia, Latin America’s trade with China has grown the fastest, from a mere US$14.5 billion in 2001 to US$241 billion in 2011. This is at a CAGR of 32.5 per cent7. Last year, Latin America’s trade with China accounted for over 50 per cent of the region’s total trade with Asia. Today, Brazil, Chile, and Peru rank China as their top trading partner.
Aside from China, other markets in Asia also present attractive opportunities for Latin America. Take Southeast Asia for example. Southeast Asia has a combined consumer market of over half a billion people. We have a GDP of US$1.8 trillion and our purchasing power is ranked fifth in the world. Southeast Asia’s average per capita income is also near that of China’s.
Given the slowing global economy and the increasing trade between Asia and Latin America, it is even more important today that we maintain free trade between our two regions. Singapore believes strongly that free trade brings great benefits to both parties. Asian and Latin American governments have continuously supported free trade, having implemented 18 Free Trade Agreements since 2004. An additional eight FTAs are now under discussions8.
To fully seize the opportunities between the two regions, Asia and Latin America could tap on regional trade agreements to facilitate connections between one other. One of them is the Trans-Pacific Partnership (TPP), which is currently under negotiation. As a possible pathway to a Free Trade Area of the Asia Pacific, the TPP will promote regional economic integration and support the development of cross-border supply chains connecting Asia and Latin America. This will help innovative and competitive businesses from either region to better reach out and access growth opportunities in each other’s growing markets.
The newly-formed Pacific Alliance economic grouping, which comprises four of Latin America’s most pro-business countries – Chile, Colombia, Mexico and Peru, is another initiative which Asian countries could look forward to engage. This Alliance not only helps to boost integration and competitiveness among the four Latin American countries, but also serves as a platform for trade and investments to and from the Asia-Pacific region. Exports from these four countries to Asia reached more than US$71 billion in 2011, and registered an average annual growth of 13 per cent between 2007 and 2011.
Singapore enjoys good trade ties with Latin America. Our trade with Latin America grew at CAGR of 27.4 per cent between 2007 and 2011, totalling some US$30 billion (S$37.9 billion) in 2011. This compares favourably to Singapore’s trade with the world, which recorded CAGR of 3.6 per cent over the same period. This is a clear signal of the trade interest on both sides.
Creating Win-Win Partnerships
Besides trade, investments have also grown between our two regions. Companies from Japan, and more recently China, Korea and Singapore have invested in Latin America.
In Singapore, our cumulative investments into Latin America reached US$35.6 billion (S$48.6 billion) as of end 20109. Our companies are active in sectors such as oil and gas, urban solutions, transport and logistics, and Info-comm Technology. We observe increasing interest from Singapore companies in the region, with some deepening their scope of collaboration. Jurong Consultants, which made their first foray into Latin America in 2007, has clinched two new projects in the region. They secured a master planning project for an industrial park in Ecuador, as well as another project in Brazil.
Likewise, Latin American companies have not overlooked Asia’s growth. As they diversify their investment portfolios in search of higher growth markets, Asia is a likely recipient of more investments from Latin America. With a business-friendly environment and strategic location, Singapore is a natural partner for these companies. To date, we have close to 20 Latin American companies based here.
But we can do more. There are several sectors which companies from both regions can join forces and create win-win partnerships. Let me elaborate.
e-Government
First, e-Government systems. Latin American countries have been actively improving their e-Government systems to develop a pro-business and efficient environment. Southeast Asian countries can contribute to this push for e-Government systems, with recognised capabilities in this area. Singapore, Thailand and Malaysia stood out in the World Bank’s 2012 Ease of Doing Business survey, ranking first, 17th and 18th respectively. Our companies are already working with some Latin American governments in this area. Singapore’s IDA International partnered Bahamas’ e-Government initiative; while CrimsonLogic is helping the Chilean government to develop a single window for international trade.
Energy
The second sector is energy. Latin America’s extensive energy resources put it in good stead. The region holds one fifth of the world’s oil resources and accounts for 13.1 per cent of world oil production10. On the other hand, Singapore is the world’s third largest oil refining industry. Keppel and Sembcorp Marine have three shipyards with close to 10,000 employees in Latin America. Just this year, both companies secured over S$12 billion worth of contracts from the region. One of Singapore’s tertiary institutions, Ngee Ann Polytechnic signed an MOU with the Federal Institute of Education, Science and Technology of Espirito Santo to train local supervisors at Jurong Shipyard’s facilities in the state of Espirito Santo, Brazil. Apart from Singapore, I understand Korean and Japanese players are also active in the region.
Collaboration between Asia and Latin America should extend to long term economic, social and political relationships
Apart from sectoral cooperation, both regions should also place increasing emphasis on longer term measures to foster closer economic, social as well as political cooperation.
For example, International Enterprise (IE) Singapore has an initiative to address the lack of ready manpower to support Singapore companies’ expansion into Latin America. IE Singapore has started work with tertiary institutions, including the National University of Singapore (NUS), Singapore Management University (SMU) and Singapore University of Technology and Design (SUTD), and Singapore and Latin American companies to build a pipeline of talent for our companies interested in Latin America. SMU has worked with IE Singapore since 2010 on their internship programme in Mexico, while NUS will organise student exchanges to Brazil and Chile next year. Singapore companies, including Olam International and Grupo Kaybee, will also be participating in this initiative.
In addition, IE Singapore is partnering the Development Bank of Latin America (CAF) and the Emerging Markets Forum to host the inaugural meeting of the Forum for Emerging Leaders of Emerging Markets in Singapore this year. In this Forum, young leaders from Latin America and Asia will exchange views on pertinent issues affecting our two regions. In this way, they will cultivate a long-term relationship between the regions.
Conclusion
Both Latin America and Asia are significant drivers of global growth going forward. We can look forward to greater collaboration between the two regions. It is also my pleasure to share with all of you that IE Singapore and the Government of the Federal District of Brazil will sign a MOU later. This MOU is a demonstration of IE Singapore’s continuing efforts to strengthen relationships in Latin America. I am confident that this MOU will help facilitate greater collaborations between our companies.
Singapore is committed to strengthening our ties with Latin America, and we welcome Latin American companies, investors and partners who are keen to partner us as they expand into Asia.
I wish you all a fruitful time at the Forum today. Thank you.
1 Source: EIU
3 Source: World Trade Organisation International Trade Statistics, 2011
4 Source: ADB and IDB
5 34%; Source: ADB
6 13%; Source: ADB
7 Source: IMF and ECLAC
8 Source: Shaping the Future of Asia-Latin America and the Carribean Relationship 2012, p. 42 and 77, Asian Development Bank
9 Source: Department of Statistics, Ministry of Trade and Industry. Figure excludes Singapore’s cumulative investments into Bermuda.
10 BP Statistical Review of World Energy June 2012, BP