In this wide-ranging interview, Minister of Trade and Industry Chan Chun Sing describes progress on ASEAN’s economic integration, the strengths of the group’s diversity, what ASEAN is doing for Singapore and how the city-state is managing its economic transformation.
Three years ago, ASEAN announced the realization of the ASEAN Economic Community. ASEAN is now pursuing further integration under the AEC 2025 Blueprint to realize its full potential. How important is this next step for the economic bloc in both increasing its intra-ASEAN trade levels and increasing its attractiveness to foreign players?
ASEAN has made considerable progress in strengthening economic cooperation and deepening integration since it was founded in 1967. The realization of the ASEAN Economic Community 2015 marks a major milestone in regional economic integration efforts. The advent of the AEC has lowered entry barriers, reduced transaction costs, widened choices for consumers and generated job opportunities.
ASEAN, as the sixth-largest economy worldwide in 2017, has bright growth prospects given its population of over 630 million, a growing middle class and increasing urbanization. It is projected to become the fourth-largest market after the E.U., the U.S. and China by 2030. To harness ASEAN’s growth potential further and remain an attractive business destination globally, ASEAN must continue to push ahead with the next phase of integration under the AEC 2025 Blueprint.
ASEAN is looking to continue strengthening the region’s connectivity both intra-region and with the rest of the world. The goal is to maximize ASEAN’s draw for global trade and investment flows to increase business and job opportunities for our people and economies. To date, ASEAN has concluded six Free Trade Agreements with Australia and New Zealand, China, India, Korea, Japan and Hong Kong.
As chairman, Singapore is actively promoting innovation, digitalization, and e- commerce among other policies. How important are those policies and initiatives for ASEAN to fulfill its potential?
ASEAN’s digital economy is estimated to have the potential to grow to US$200 billion by 2025, with e-commerce alone accounting for US$88 billion. To realize this, ASEAN needs to ensure that our economies are digitally connected and enabled.
Initiatives that promote digitalization and e-commerce will strengthen ASEAN’s value proposition globally, and position ASEAN for future growth. For example, Singapore is working with ASEAN Member States on an agreement on e- commerce that advances trade rules, lowers businesses’ operating barriers to entry, and builds up greater digital connectivity, to facilitate e- commerce flows in the region. Aspiring entrepreneurs, start-ups and micro, small and medium enterprises will be able to market their products and services regionally, while sending and receiving electronic payments will become easier.
To maintain competitiveness and move up the value chain, ASEAN also needs to keep innovating. We need to redefine ourselves from being a market and production base for goods to also become a generator of ideas. Innovation is a key driver of business and has been critical for economies to unlock new, scalable and sustainable means of growth. In this area, Singapore is working with partners on a private-sector driven ASEAN Innovation Network to strengthen the linkages between innovation ecosystems in ASEAN members.
How will initiatives such as China’s One Belt, One Road affect the development of ASEAN?
The initiative aims to connect businesses and people around the region, and has the potential to improve connectivity between ASEAN and China and the rest of the region. China has placed its ties with ASEAN high on its agenda of international cooperation, and views ASEAN as a key partner for promoting trade growth.
In spurring trade, China has been ASEAN’s largest trading partner for several years while ASEAN has consistently been among China’s top three trading partners. The upgraded ASEAN-China Free Trade Area entered into force in 2016 and a year later ASEAN-China trade volume reached US$515 billion, surpassing US$500 billion for the first time.
Financial linkages have also improved. ASEAN countries have established more than 30 banking institutions in China, while Chinese banks have established more than 150 banks and offshore banking units in the various ASEAN states.
The political, economic and social diversity of ASEAN member states acts as both boon and bane for regional integration. What are the main opportunities and challenges arising from ASEAN’s diversity?
ASEAN is a diverse group varying in size and stages of development. Indonesia, for example, represents almost 40% of the region’s economic output and is a member of the G20, while there are some LDCs in the group. This diversity is also reflected in culture, language and religion.
Despite our diversity, or perhaps because of our diversity and complementary strengths, ASEAN as a regional bloc has come a long way in 50 years. ASEAN member states have forged mutual understanding and deepened economic integration, and are committed to the idea of “ASEAN Centrality”. Beyond the approach of seeking out complementary roles and opportunities for collaboration, ASEAN has also deepened partnerships with one another through jointly tackling challenges. Meanwhile, frameworks to deepen transport connectivity or to strengthen co-operation against transnational crime have been established to strengthen the ASEAN Community.
We are cooperating in numerous multi-faceted areas ranging from climate change, to e-commerce and cyber security to name a few.
How important is ASEAN for Singapore’s growth and what role should Singapore play in its development?
Singapore has natural resource constraints and relies heavily on trade with the region and the world. ASEAN is an important market with its growing middle class, rising affluence and continually improving connectivity, and has been both a key final demand market as well as a source for supply chain components.
ASEAN is Singapore’s largest trading partner. In 2017, Singapore’s trade with ASEAN amounted to US$247 billion, accounting for a quarter of Singapore’s total global trade. Singapore’s membership has also enabled us to collectively negotiate with stronger standing with larger economies with interests in the region and amplified our voice in the international arena.
During Singapore’s chairmanship this year, member states recognized the need to further liberalize trade and enhance economic integration. This will bring about tangible benefits to communities and people, through new business opportunities and the creation of jobs.
A year after its announcement what is your analysis of the 23 Industry Transformation Maps (ITMs) and your expectations moving forward as the government recently announced the six industry clusters to drive economic transformation?
The ITMs cover about 80% of Singapore’s economy, from domestic-oriented sectors such as healthcare, to external-oriented sectors, such as logistics. Each ITM develops a growth and competitiveness strategy for the specific industry, touching on aspects such as productivity, jobs and skills, innovation, and internationalization to enable our businesses and people to seize opportunities in the future economy. Our approach has been to bring together key stakeholders, such as businesses, trade associations and chambers, unions, educational institutions and the government, so that we can do this in partnership.
The majority of the ITMs were launched only last year. We are focusing on implementing them and have seen good progress in some ITMs. For example, in line with the Food Services ITM’s strategy to raise productivity, more than one-third of food outlets in the industry have now adopted at least one technology solution. Investments in automated kitchen equipment, for example, can save an average of two workers per outlet. This allows for employees to be redeployed to higher value-added tasks, such as customer engagement, which have made the businesses more competitive. We will continue to build on this momentum.
What is the role of the Smart Nation initiative in Singapore’s transformation?
Apart from the aim of improving the quality of life for our people, the Smart Nation initiative is about transforming the economy and ensuring that we grow our businesses to create jobs and enable them to capture new opportunities by harnessing technology. To achieve this, digital technologies must be adopted across all sectors of the economy. We will continue to develop strong capabilities and infrastructure to support this.
Strong capabilities in areas such as data analytics and cyber security will also be needed to enable Singapore to fully reap the benefits of digitalization. Singapore is in a good position to succeed as a Smart Nation, given our strengths. Beyond having a digitally literate population, we must keep pace with the latest developments and be nimble to seize opportunities in the digital sphere.
Can you describe for us the major initiatives taken by the government to promote innovation and how important is the overall ecosystem in continuing to attract foreign companies to partner with Singapore?
Research, innovation and enterprise are cornerstones of Singapore’s national strategy to develop a knowledge-based, innovation-driven economy and society. From 2016 to 2020, the government has set aside S$19 billion for research, innovation and enterprise activities. This will leverage science and technology to address national challenges, and build up the innovation capacity of our companies to drive economic growth.
To strengthen Singapore’s connections to major innovation hubs around the world, and in line with recommendations from the Committee on the Future Economy, we are developing the Global Innovation Alliance with the objective of establishing networks to create more opportunities for Singaporean students, entrepreneurs and businesses to gain overseas experience, connect, and collaborate with their overseas counterparts. This initiative builds on existing overseas initiatives and networks built up by our higher education institutions, government agencies and Singapore companies.
How important is it for Singapore to continue nurturing talent in order to realize its potential?
Singapore has long held that people are our only and most precious natural resource. We must make the most of this resource, by maximizing the talent and potential of every Singaporean. Only then can we maximize Singapore’s potential as a whole.
While talent may be broadly defined and there are many routes to fulfilling it, we see certain areas where it is especially critical to nurture Singapore talent. Through the SkillsFuture movement, we support Singaporeans to develop the specialist skills required for our future growth clusters, and in areas where there is a global shortage of talent; for instance, digital skills. There, we have the TechSkills Accelerator program – a SkillsFuture initiative that enhances training and placement opportunities for ICT jobs across the economy. Such initiatives help position our workers, enterprises and industries to capture new opportunities and capitalize on technological and business model disruptions, rather than succumb to them.
Beyond technical skills, Singapore also needs an agile workforce that has expertise in the Asian markets and can operate confidently in the region and around the world. This is crucial to our long-term competitiveness and success as a Global Asia node. To nurture this global outlook, we have expanded the avenues for Singaporeans to gain overseas exposure at different stages of their careers. For youths, the SkillsFuture Young Talent Programme offers overseas internships and work-study programs in fast-growing Asian markets. For established Singapore business leaders, we have recently introduced an ASEAN Leadership Programme to help them better understand Southeast Asian markets, thus enabling them to expand their business and build networks in the region.