KEYNOTE SPEECH BY DR KOH POH KOON, SENIOR MINISTER OF STATE, MINISTRY OF TRADE AND INDUSTRY, AT THE GLOBAL TRADER DIALOGUE, THURSDAY, 17 MAY 2018, 5:50PM, AT PARK ROYAL HOTEL
Distinguished Guests,
Ladies and Gentlemen,
Introduction
1 Good evening, I am pleased to join you at the Global Trader Dialogue 2018. I am told that there are close to 400 attendees from various organisations this evening, which is a clear indication of the weight and relevance of this flagship event for the commodities trading sector.
Commodities market on an upturn
2 Notwithstanding current uncertainties and rising trade tensions we face today, the commodities market is broadly on an upturn compared to previous years. Prices have risen over the past three years across various commodities, such as oil, coal and non-ferrous metals. While global supplies are currently keeping pace, strong demand growth from key markets, such as natural gas, nickel and copper, is driving increased investments in the sector.
3 These trends are reflected in the performance of the commodities trading sector in Singapore, which generated close to US$1.2 trillion in turnover in 2017. The sector also contributed over S$28 billion in local business spending and is supported by over 15,000 professionals.
How digitalisation is transforming commodities trading
4 While the commodities trading sector has been doing well over the past year, we are cognisant that it is no exception to the trend of rapid changes upending existing business models and products. In particular, digital technologies are disrupting traditional business models and catalysing new growth areas across various sectors.
5 We have observed various ways in which the commodities trading sector is embracing digitalisation to capture opportunities, rather than be left behind. In particular,
i. Companies are investing in internal systems to gain a competitive edge. For instance, Vitol has invested and developed in-house IT capabilities that better support its traders, including through leveraging big data to achieve efficiency gains.
ii. The development of digital business-to-business (B2B) marketplaces has helped trading companies to widen customer access and benefit from the value added services that these platforms offer. A good example is SourceSage, a local enterprise which provides professionals real-time market information and allows traders a platform to conduct their transactions. The company started with the oleo-chemicals industry in 2015 and has since ventured into several other industries. It now has a presence in over 100 countries and services more than 10,000 clients such as Cargill and BASF.
iii. There are also various industry-led initiatives that tap on digitalisation to promote trade facilitation and market intelligence. Chinese Zall group and SGX have joined hands to operate an online global trading platform for a range of commodities such as cotton, sugar and chemicals. This platform will provide transaction matching, supply chain financing, logistics services, regulatory and compliance services and also offer trade data and indices to facilitate global trade through digitalisation.
Developing a more vibrant and innovative trading ecosystem
6 Amidst the transformation of the trading sector, Singapore must innovate and reinvent itself to remain relevant as a global trading hub. Let me share three key areas where Singapore is embracing change to strengthen our trading ecosystem.
7 Firstly, facilitating cross-border trade connectivity and building digital connectivity globally is extremely vital to thrive in this new digitally-driven economy. With industry partners, we are developing the National Trade Platform (NTP), a one-stop trade information platform that enables digital data exchange between all key trade and logistics stakeholders. I am pleased to note that commodities players such as BHP and Cargill have been participating in NTP working groups that are looking at digitising trade finance and shipping documentations.
8 Secondly, we are working to ensure our legal framework is up-to-date and facilitates new ways of doing business in a digital economy. IMDA is co-leading the review of the Electronic Transactions Act (ETA) with AGC, and working closely with other public agencies to allow more electronic documents such as bills of lading, to enjoy the same legal recognition as a paper based document. With these changes to the ETA, businesses in multiple sectors such as the trading, shipping and financial sectors will benefit from faster speed of transmission, higher security than paper equivalents and opportunities related to the data reuse.
9 Thirdly, we are encouraging companies to embrace open innovation across the ecosystem of private sector enterprises and research institutes. Singapore has a thriving ecosystem of MNCs, local enterprises, start-ups and research institutes, and we have seen many products and innovations emerge from collaborations amongst them. For example, Sumifru, a leader in the agri-commodities sector for bananas, is currently working with A*STAR’s Institute for Infocomm Research to tap on data analytics and artificial intelligence to help manage their plantations in the Philippines.
10 Recognising the value of collaboration in innovation, Singapore will support companies to build strong linkages to our vibrant innovation ecosystem. Commodity companies can tap on Enterprise Singapore’s Partnership for Capability Transformation (PACT) scheme to collaborate with Singapore companies to co-create solutions and jointly secure business opportunities overseas.
11 Singapore is also committed to further deepen innovation within our trading ecosystem. To this end, we will launch the new Trade Infrastructure Development Fund (TIDF) this year, to support the development of three key areas. Firstly, it seeks to develop business-to-business digital marketplaces to anchor innovative capabilities and technologies in Singapore; secondly, it supports innovative non-bank trade financing solutions to provide our companies with a wider range of financial service offerings, such as trade finance funds; and thirdly, it seeks to expand commodity derivative offerings for the trading community through support of ecosystem players, such as proprietary trading firms.
12 Regardless of whether the trends of today are an evolution or revolution, companies must stand ready to ride on the new wave of change to enhance our competitiveness in the global markets. We urge the industry to step forward to co-innovate and create new value with us.
Talent pool remains critical for Singapore
13 Even as we progress into the digital era, trading at its core is still a relationship driven business that is reliant on talent. Individual relationships are, and will continue to be important in commodity trading as traders need to have a good sense of the market, and be effective at negotiating and reaching an agreement on each transaction. Traders therefore have specific expertise and experience that cannot be easily digitalised.
14 Singapore continues to invest significantly in talent development, and we rely on the strong support from industry players to ensure that training and development remain relevant to industry needs.
15 To ensure that our young talent are market-ready, Enterprise Singapore works with tertiary institutions to ensure that they are equipped with the relevant skills. Enterprise Singapore has collaborated with the Singapore Management University (SMU) on the SMU’s International Trading Track programme, which has trained 400 students in this field. Enterprise Singapore has also jointly developed the syllabus with the Nanyang Technological University (NTU) and industry practitioners in the development of the International Trading Programme (ITP) to get students acquainted with subject matters such as trade finance, supply chain management, risk management and derivatives trading. I am pleased to note that the ITP is expecting its first batch of graduates this month.
16 Beyond entry-level talent, there are Professional Conversion Programmes (PCP) to expand the pool of talents of mid-career professionals. PCP equips candidates with essential skills for the commodities trading sector through a structured syllabus and on-the-job training. I am heartened to hear of individuals who have benefitted from PCP. Take the example of Mr Poh Yong Ren. Previously from the banking sector, Mr Poh joined a local commodities trading company, Clearsource Pte Ltd. Through the PCP, Mr Poh gained a deeper understanding of the value chain of various commodities which has enabled him to support his trading team more effectively by ensuring good management of financial resources in the sector.
17 The commodities trading sector continues to generate good jobs for Singaporeans across a range of functions, including finance, logistics, and technology, and I am pleased to announce the establishment of the Wholesale Trade Placement Accelerator to ease the job-matching process in the sector. This initiative is a collaboration between Enterprise Singapore, Workforce Singapore Agency (WSG) and the Employment and Employability Institute (e2i) which aims to benefit both employers and job seekers by coordinating placement efforts. I would like to thank our industry partners, trade associations, and educational institutions for their strong support of our talent development initiatives, and we continue to welcome more educational institutions and industry players to partner us in these programmes.
Conclusion
18 In closing, I would like to reiterate that the commodities trading sector cannot stand still, and has the potential to grow as it adapts to technology and digitalisation. This can only be realised through the close support of the industry and ecosystem players, in concert with the government.
19 I wish you all a fruitful discussion at the Global Trader Dialogue.