“State Intervention: The Good, The Bad and The Ugly”
Distinguished guests,
Ladies and Gentlemen,
Good evening. It is my pleasure to join you at the 2014 Global Trader Dialogue.
2013 has been a challenging year with global merchandise1 trade. While global macroeconomic conditions picked up towards the second half of the year, the pace of trade growth remained sluggish at 2.1% due to poor demand from the advanced economies.
Nonetheless, amidst the ongoing recovery in the advanced economies, we remain cautiously optimistic in our outlook for global trade. Recovery in the Eurozone is on track, with major Eurozone economies expected to return to low but positive growth levels. Likewise, despite the slow start due to unusually harsh winter conditions, the US economy is expected to improve modestly due in part to the easing of fiscal cutbacks.
Last year, Asia surpassed Europe to become the world’s largest trading region, accounting for close to 40% of world trade flows. This year, we expect Asian trade flows to continue growing, boosted by the recovery in the advanced economies.
Importance of Wholesale Commodity Trading to Singapore
Strategically located within Asia, Singapore has maintained its share of global trade in tandem2. More global trading companies are locating their operations here. Singapore’s air and sea logistics capabilities, our financial services particularly in international banking and trade financing, and our legal infrastructure are often cited reasons why global traders like Singapore.
Over the past year, a number of traders have either expanded their operations or taken up complementary value-added activities here. For instance,
a. BHP Billiton undertakes strategic HR functions such as global talent attraction, development and strategic deployment in Singapore,
b. Sportsmaster, launched its R&D efforts with the Nanyang Technological University’s Institute of Sports Research to develop products for Asia,
c. Metalor will officially open its gold refinery in June this year.
d. DeBeers is relocating its purchasing, production and auction sales to Singapore.
e. Advanced Materials Trading will also be setting foot here as our very first Rare Earth and Metals trading house.
In the area of energy trading, there are now 25 companies with an LNG trading or marketing presence compared to none a few years ago. This has grown on the back of 1403 oil and petrochemical traders that we have in Singapore.
Commitment to Enhance Trade Infrastructure
We intend to build upon our achievements and further enhance the competitiveness of our international trading clusters. Let me elaborate our efforts in three areas, namely, capital markets, price discovery and risk management, and manpower.
Deep Capital Markets
First, in terms of capital markets, we appreciate your need for financing as you grow your company here. Singapore is a premier financial centre with deep capital markets. I am happy to note that in February this year, Trafigura raised S$200 million through its first Singapore dollar perpetual bond – making it the first international trading firm to successfully do so4. This followed on the back of its successful US$500 million bond issuance exercise last year, which was five times oversubscribed5. I hope that more companies will continue to tap on our capital markets to fuel their expansion in Asia.
Price Discovery & Risk Management
Second, on price discovery and risk management, we have aspirations to develop Singapore as the price discovery hub for commodities. Over the years, we have worked with many of you to realise this. I am pleased to note that the Singapore Exchange (SGX), recently launched the hot-rolled coil derivatives contract in response to industry needs to manage the price risk of the seaborne steel market in Asia. SGX has also announced that they will be introducing coking coal derivatives in July this year. These products are complementary to their flagship Iron Ore derivatives launched in 2009, which was the world’s first.
More recently, the Intercontinental Exchange, or ICE, announced its entry to Singapore through the acquisition of Singapore Mercantile Exchange. An established commodity exchange like ICE making its entry to Singapore marks an extremely significant step forward for our marketplace. It will present greater opportunities for the industry to develop regulated price discovery and risk management infrastructure in Singapore.
Manpower
Finally, on manpower, we are committed to developing a ready pool of talent for the industry and in support of the industry growth. In 2007, IE Singapore worked with the Singapore Management University and industry partners to launch the International Trading Institute, or ITI. To date, over 200 local graduates have completed the International Trading Concentration and have joined trading and its related sectors.
Building on the success of ITI, IE Singapore is now expanding the trading curriculum to students from other universities. In partnership with the Singapore University of Technology and Design, or SUTD, ITI recently introduced the Trading Associate Programme for SUTD students in March this year. SUTD engineering systems and design students undergoing the Trading Associate Programme will have the opportunity to undertake electives in trading, risk management, shipping and trade finance to augment their technical knowledge, preparing them for possible careers in the trading sector.
These manpower initiatives would not have been possible without your participation. Please continue to give us your support as we introduce such initiatives to ensure a continuous pipeline of talent not only for trading, but also in related sectors such as supply chain logistics, financial services, transportation and distribution.
Commitment to International Regulatory Reforms
As an international trading hub, we are committed to update ourselves to international obligations. In this respect, we are working towards implementing the recommendations of the G20 and Financial Stability Board on strengthening regulation of over-the-counter derivatives, taking into account the characteristics of Singapore’s markets.
Recently, there has been increased scrutiny on taxation issues leading to possible changes in international tax rules addressing cross-border tax avoidance activities. Singapore does not condone tax avoidance, especially artificially contrived arrangements conducted solely to flout or exploit loopholes in tax rules. We hold the view that profits in cross-border activities be taxed where substantive economic activities are undertaken. Singapore will continue to focus on promoting substantive economic activities and companies too need to ensure that they do not partake in tax avoidance activities.
It is crucial that we continue to adopt a balanced approach to ensure that our business environment remains competitive and relevant to the global trading community.
Conclusion
Singapore is today a premier trading hub because of our political stability, strategic location, favourable business environment, and highly-trained workforce. We will continue to strengthen these advantages to enhance the quality of our business environment. We welcome your feedback and ideas on new initiatives that can help us build an attractive and sustainable trading hub. Together, we will build a vibrant and sophisticated trading community here in Singapore.
Thank you.
1 Trades of goods, excluding services
2 Singapore maintained its share of global trade at 2.1% in 2011,2012 and 2013.
3 Based on the number of energy and petrochem GTP Companies
4 Metal Bulletin: http://www.metalbulletin.com/Article/3307595/Trafigura-raises-158m-via-Singapore-bond-issue.html
5 Trafigura: http://www.trafigura.com/media-centre/latest-news/trafigura-raises-sgd-200-million/