Speech by Mr Lim Hng Kiang, Minister for Trade and Industry, At the Global Trader Summit 2013, Friday, 10 May 2013, 7.00pm, Capella Singapore
The Trading Tightrope: Balancing Choices in Global Trading
Distinguished Guests,
Ladies and Gentlemen,
Introduction
Good evening and a warm welcome to all of you to the 2013 Global Trader Summit. It is heartening to see so many distinguished global leaders from the trading community here this evening.
2. The video we have just seen shows how far Singapore has come, from a small trading port to the globalised city we are today. We achieved this by keeping our economy open. We invested significantly in infrastructure. More importantly, we invested heavily in educating our people.
Singapore’s Performance as a Commodities Trading Hub
3. At present, Singapore is Asia’s largest physical commodities trading hub. We have over 400 international trading companies based here. Our offshore trading volume surpassed the US$1 trillion mark for the first time in 2011. The trading companies in Singapore have created good quality jobs and generated spin-off benefits for Singapore’s shipping and banking industry.
4. In recent years, we have also seen strong interest from companies from emerging Asian economies. For example,
From India, we have Tata Steel, the 12th largest steel producing company in the world, choosing Singapore to conduct its regional treasury for Southeast Asia and global procurement activities.
Tianjin Julong (天津聚龙), one of the top three privately owned palm oil companies in China, has also set up its international trading office in Singapore.
From Russia, Yamal LNG[1] and Mechel Mining[2] are two companies that recently decided to anchor their trading and marketing activities here.
5. This diversity of trading companies bodes well for Singapore as international commodity companies will be able to access the global marketplace right here in Singapore.
Good Opportunities but also Challenges Ahead
6. The path that lies ahead of us is promising, but presents some challenges as well. It is therefore timely that we take stock of our current and future operating environments. In this regard, allow me to share my thoughts on three key developments that will impact on the trading activities.
First, Corporate Governance and Regulatory Challenges
7. We remain committed to growing our trading sector by maintaining a stable and predictable regulatory environment for businesses. Our philosophy has always been to ensure an open, neutral, consistent and competitive business environment, backed by a sound and stable regulatory framework. This balance is what has made Singapore the location of choice for many businesses over the years.
8. For this reason, Singapore is committed to meet the G20 and FSB recommendations on over-the-counter (OTC) derivatives in a manner that is risk-appropriate, impact-sensitive and outcome focused. We thank you for your feedback on the proposed reforms like trade reporting for better supervisory oversight, and we believe this dialogue is important in striking the right balance in the regulatory environment.
Second, Ensuring Strong Support Infrastructure
9. Another challenge that we face is how Singapore can remain competitive, and relevant to the trading community. Singapore is not the cheapest place for doing business, but our efficiency, political stability and high standards – especially in the area of trade infrastructure – are strengths that continue to provide us with a competitive edge.
10. On the financial front, Singapore is a premier centre with over 500 financial institutions, providing easy access to financing and related services. Alongside Singapore-based global and regional banks, our local banks are now among the main banks that support the financing needs of commodity trading companies.
11. I am happy to see the trading companies in Singapore actively tapping into our capital markets. For instance, both Trafigura and Louis Dreyfus Commodities recently issued perpetual bonds of US$500 million and US$350 million respectively out of Singapore. Both companies’ bond issue were met with strong interest, and their order books were oversubscribed.
12. We do recognise that we cannot rest on our laurels. This sector is constantly evolving, and we need to understand these new developments so that Singapore remains relevant as a trading hub. One of the most significant developments that took place this year is the announcement by the Chinese government to appoint the Industrial and Commercial Bank of China Limited (ICBC) as a Renminbi-clearing bank in Singapore. This is a strong signal from the Chinese authorities that they hope to develop Singapore into the next major offshore Yuan centre after Hong Kong. IE Singapore is currently working with the Monetary Authority of Singapore (MAS) to engage the banks and trading firms to promote and build expertise in this area.
13. For risk management, IE Singapore has been facilitating and supporting the Singapore Exchange (SGX) in developing new commodity derivative contracts tailored to manage the risks associated with Asian trade flows. Specifically, SGX has achieved a good track record for its iron ore swaps, which currently account for 90 per cent of iron ore swaps cleared globally. In addition to the introduction of iron ore options in September last year, SGX recently launched iron ore futures, providing market participants with another instrument to manage their price and credit risks.
14. IE Singapore is also in close contact with foreign commodity derivative exchanges like the Chicago Mercantile Exchange (CME) and the InterContinental Exchange (ICE).Their offices in Singapore will serve as their regional headquarters handling their Asian business. We continue to welcome established commodity derivative exchanges like CME and ICE to use Singapore as a base to expand their businesses into Asia and develop innovative products to meet the needs of traders operating in Asia.
15. With a critical mass of players already active in Singapore, we are also looking at setting up a platform for both the private and public sectors to meet regularly to discuss issues of interest to the trading community. Work has commenced with several companies to form a group, and we hope that this will eventually evolve into an industry association to serve the needs of all Singapore-based commodity traders.
Third, Grooming the Right Talent
16. One of the key goals of our economic policy is to create good jobs for our people. The trading sector is one sector which has the ability to achieve this. It is therefore critical that we have a pipeline of competent local talent to support the trading community, not just for companies we have attracted from overseas to anchor their activities here but also for our local companies so that they can grow and seize the opportunities in the region. The results have been encouraging. Today, we have Singaporeans forming about 60 per cent of trading professionals hired by international trading companies here.
17. As part of the continual investment in developing local talent for the trading sector, IE Singapore, in partnership with the Singapore Management University (SMU) and industry partners, formed the International Trading Institute in 2007, as a means of equipping and preparing local undergraduates with specific trading skills. To date, the programme has produced 200 local graduates. Starting next year, this talent pool will grow, as students from the Singapore University of Technology & Design (SUTD) will also benefit from SMU’s trading curriculum.
Partnering With Us
18. The issues I have just shared are key to ensuring that Singapore will remain an attractive location for trading companies to anchor their activities here, and more importantly, entrench our positioning as a global trading hub. However, the Government cannot do this alone. Continue to give us your feedback, ideas and assessments of new and emerging developments. MTI and IE Singapore look forward to working closely with you in our efforts towards building a commodity trading hub here that is characterised by depth and sophistication. We want to ensure that Singapore will continue to be the choice location for you.
On this note, I wish all of you a pleasant evening ahead. Thank you.
[1] Yamal LNG has set up a base in Singapore to trade and market LNG.
[2] Mechel Mining, the largest metallurgical coal producer in Russia, has set up a marketing arm in Singapore to market coal to the Asia Pacific region.