SPEECH BY MR THARMAN SHANMUGARATNAM, DEPUTY PRIME MINISTER & MINISTER FOR FINANCE, AT THE OPENING CEREMONY OF THE 2ND CHINA (BEIJING) INTERNATIONAL FAIR FOR TRADE IN SERVICES (CIFTIS) / 2ND GLOBAL SERVICES FORUM, 29 MAY 2013, 11:30 AM AT GREAT HALL OF THE PEOPLE
H.E. Li Keqiang, Premier of the People’s Republic of China,
Dear Excellencies,
Ladies and Gentlemen,
Introduction
1. It is my pleasure to be here with you for the opening ceremony of the 2nd China (Beijing) International Fair for Trade in Services (CIFTIS). I wish to first congratulate the Chinese Government for its strategic decision to host this significant platform for services companies from various countries and cities to exchange ideas and forge partnerships. CIFTIS certainly has potential to bring Chinese and Singapore companies together in collaborative ventures.
Regional initiatives important amidst slow global growth
2. Our regional initiatives are especially important in the post-crisis global environment. The advanced economies have yet to recover from the crisis. Growth in the US is picking up, but it remains below its potential. In Europe, recessionary conditions persist and there is no easy way out of the Eurozone crisis. The emerging market economies are growing at a healthier rate. However, even amongst the emerging economies, most are not achieving their full potential.
3. This is unlikely to be a temporary situation. We may well be faced with slow global growth for several years. Structural difficulties in the advanced economies are at the core of the problem, but what happens in the advanced world will inevitably affect the emerging markets.
4. Against this backdrop, there are also emerging trends in technology, energy costs and business models amongst global companies that will lead to new patterns of investment around the world. For example, international companies may re-shore certain manufacturing activities, or bring them closer to final consumer markets in the developed world. It is therefore important for us to explore every opportunity to expand intra-Asian trade and investment, in goods and services, and thereby open up new opportunities for growth.
Driving Economic Growth through Open and Efficient Services Markets
5. Trade in services is indeed emerging as a major driver of growth in Asia. There are a few structural trends behind this. First, the growing middle class and affluence in developing Asian economies, which spurs demand for many services – better education and healthcare, financial services, or creative and media services. There is a lot more potential for this to drive growth, as services are still a relatively small proportion of the economies of developing Asia[1].
6. The second structural force is China itself. China committed to a generous opening of its services sector when it acceded to the World Trade Organisation (WTO) in 2001.With the emphasis in China’s 12th Five-Year Plan on urbanisation, social development and private consumption, a second wave of growth in services is taking place. This is a key reason why we are gathered here today at CIFTIS – with companies around the world seeking to play an active role in the development of China’s services sector.
7. The third force involves technological advances. Information and communications technologies are increasingly allowing modern services to be unbundled, so that they can be produced in different countries. This opens up the potential for significant innovations in intra-Asian trade, just as we saw with the manufacturing supply chain over the last few decades.
8. Individually, these trends are significant; taken together they open up a new era in intra-Asian trade. With a rapidly rising middle-class creating new demand within emerging Asia, the Asian supply chain will no longer be merely about producing in Asia to meet final demand in the West.
9. Together, these forces will very likely lead to new patterns of connectivity between Asia and China. We will see intra-Asian trade extend well beyond the trade in commodities and intermediate manufactured goods. It will move increasingly towards goods and services that meet the demands of Asian consumers. Not only will this transform intra-Asian trade, it will also open up new opportunities for Asia’s integration with the rest of the world.
10. The benefits will not just be for businesses but for citizens as well. A diverse and efficient services sector is essential for modern societies, especially as they advance beyond the middle-income stage of development. It is also a vital complement to the building of advanced and high value-added manufacturing sectors. The services sector is hence central to the economic transformation efforts of many Asian countries, as we seek to boost productivity levels and raise living standards for our citizens.
Fostering Stronger Cooperation with China in Services
11. We hope to see strong growth in the China-Singapore services trade in the years to come. China is already Singapore’s 5th largest services export destination. Our two countries have made good progress in building the foundations for the cross-border flow of services. The recent designation of the Industrial and Commercial Bank of China (ICBC) as a RMB clearing bank in Singapore allows Singapore-based and Chinese companies to conduct business using RMB, with reduced transaction costs and exchange-rate risks. I am also optimistic that Singapore and China will continue to work closely to facilitate freer flow of services trade through the China-Singapore FTA and the ASEAN-China FTA. In addition, we look forward to establishing new opportunities through our negotiations of the recently launched Regional Comprehensive Economic Partnership (RCEP).
12. Singapore is a small country, but we have acquired some niche areas of expertise that may be relevant to other countries. With support from the Singapore Government, the Singapore Business Federation is leading a delegation of 150 business representatives at CIFTIS, from areas such as urban solutions, environmental services, education and skills training, professional services, logistics, and information-communication technology services.
13. Singapore companies are keen to play a role in China’s urbanisation. China’s planners are rightly emphasising not only the development of physical infrastructure but more importantly the quality of life, through broad-based access to social services and sustainable urban solutions for its people. This has indeed been Singapore’s experience as a densely populated city-state. Through deliberate urban planning and innovations such as in water and waste management, in the development of housing neighbourhoods with convenient access to healthcare and other services needed by citizens, and in managing traffic congestion, we have sought to deliver a relatively high quality of life.
14. There is also opportunity for Singapore’s professional services companies to play a role as Chinese companies go global. A study by the Economist Intelligence Unit predicted that China’s outbound direct investment (ODI) will increase by about 50% over the next 5 years, to US$172 billion in 2017. Singapore companies, with familiarity of many overseas markets and the advantage of a multi-lingual workforce, are ready to work with Chinese companies to bridge “last-mile” gaps in new business environments when they invest overseas. Some Singapore law firms and business advisory companies established their presence in China several years ago. As I speak, Singapore’s professional services companies from the legal, audit and finance sectors are engaging Chinese companies at a seminar here, held in conjunction with CIFTIS.
Conclusion
15. We are therefore optimistic about the prospects for collaboration in services between Singapore and China. I would like to once again congratulate the Chinese Government on organising this significant event and wish all participants of CIFTIS a fruitful and successful event.