(Photo: MFA) Speech by Minister for Foreign Affairs K Shanmugam at Fundacao Getulio Vargas, Sao Paulo, 3 April 2013.Minister for Foreign Affairs and Minister for Law K Shanmugam delivered a speech on "Latin America and Asia: Challenges and Unexplored Opportunities" to Brazilian industry leaders and key opinion shapers at the Fundacao Getulio Vargas in Sao Paulo on 3 April 2013. Minister Shanmugam noted the continued robust growth in Latin America and Asia, and the similar development challenges facing both regions. He outlined how Asia and Latin America could learn from each other, and leverage one another's niche strengths in finding solutions to these challenges. Minister Shanmugam also highlighted how Brazil could tap on Singapore's role as an economic, financial and transport hub to explore opportunities and expand its reach in the region. A transcript of Minister Shanmugam's speech is appended.
Minister Shanmugam will meet with Mayor of Sao Paulo Fernando Haddad on 4 April 2013, before departing for Brasilia in the afternoon.
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MINISTRY OF FOREIGN AFFAIRS
SINGAPORE
4 APRIL 2013
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Latin America and Asia: Challenges and Unexplored Opportunities
Professor Maria Tereza Leme Fleury, Dean of FGV Business School
Distinguished guests
Ladies and Gentlemen
It is a great honour for me to be here with all of you, to speak about the complementarities between the fast-growing regions of Asia and Latin America. I would like to focus on how far we have come, where we are today, and what lies ahead in the future.
Latin America and Asia: The Future
For a long time, Asia and Latin America seemed to be operating on parallel tracks – aware of each other, but with few links between us. Distance and language played a role in this divide. Spanish and Portuguese are the primary working languages in Latin America, while a wide variety of languages is spoken across Asia. Economic interactions were limited. Latin America looked to the US and Europe, and Asia also looked to the US and Europe. This came about because of our colonial history and post-World War II realities.
Today, our two regions are reaching out to one another once again. I say once again because centuries ago, we were trading with each other. The volume of trade between Latin America and Asia has grown exponentially in the last decade, to reach an estimated US$442 billion in 2011.
Challenges with Growth Story
Latin America and Asia have been the two fastest-growing continents in the 21st century. This growth was founded on increasing urbanisation, industrialisation, and the growth of the middle class. Even in the aftermath of the global economic crisis of 2008, Latin America enjoyed a GDP growth rate of 5.7% per annum, and Asia Pacific grew by 7% per annum.
Rapid development and economic growth, however, bring accompanying challenges. Asia and Latin America are now confronting the social and physical effects of growth. Rising urbanisation and migration to cities and towns have increased demand for housing, transportation, and basic utilities. There have been strains on urban infrastructure, with the sprouting of new factories, businesses, and ports. Changing demographics and a rising middle class have also resulted in new expectations, like access to more goods, as well as faster and better services. The rise of new social media cuts down on governments' reaction time to crises and the lead time to meet the new demands and needs of our people.
Our governments now have to address complex problems, while juggling competing demands for finite resources. First, we have to focus on human resources and ensure that our next generation is equipped with necessary skill sets through our education system. The training of our workforce has to be constantly upgraded to meet market needs. Second, we need to look at sustainable cities. We have to ensure better urban planning and infrastructure development so that our people continue to enjoy a good quality of life. Third, we have to maintain our competitive edge. We have to ensure that not only our workforce, but also our government services and transportation infrastructure meet expectations.
In these areas, Asia and Latin America can learn from each other. We can leverage on one another's niche strengths in finding solutions to these challenges, and work hand in hand for mutual benefit.
Why ASEAN?
We are facing a time when our external environment will continue to be challenging. The fragile international economic and financial situation will persist. At the same time, traditional external drivers of growth, such as the US and EU, are grappling with tough decisions on how to reform and jumpstart their economies. They will recover eventually. But meanwhile, there are also abundant opportunities in the emerging markets of Latin America and Asia, as alternative markets for exports and services.
In thinking of Asia, many will immediately think of China. But the story of Asia's rise is more than China. Southeast Asia and the ten countries of the Association of Southeast Asian Nations, or ASEAN, are a key part of the Asian renaissance.
In ASEAN alone, there remains tremendous untapped potential. ASEAN's combined GDP has jumped four-fold since 1998, to almost US$2.2 trillion, which is larger than India's or Russia’s. ASEAN's GDP is also projected to grow 5.5% annually between 2013 and 2018. Geostrategically, ASEAN sits between the behemoths of China and India, and straddles several strategic shipping lanes. It is an area rich in natural resources, with a combined population of 650 million people. They are young, skilled, and optimistic, with rising incomes, and hungry for energy, food, and new goods and services.
Further, ASEAN continues to deepen regional integration efforts and is on track to create an ASEAN Economic Community, or AEC, by 2015. The AEC will knit ASEAN into a single market and production base. Intra-ASEAN trade grew at an average of 10.2% annually from 1995, to reach almost US$600 billion in 2011. This was higher than the average annual growth in global trade of 8%. We have the Master Plan on ASEAN Connectivity, which includes projects such as the Singapore-Kunming Railway, the ASEAN Highway Network, and the ASEAN Broadband corridor. This is because ASEAN still has infrastructure needs. We need to improve our road network. Rail is underdeveloped. And we need ports and airports.
We in ASEAN believe in free trade. Externally, ASEAN is connected through FTAs with China, India, Japan, South Korea, Australia and New Zealand. We are now creating a Regional Comprehensive Economic Partnership (RCEP) to combine our FTAs into a single free-trade area, with a combined GDP of US$17 trillion, or effectively one-third of global GDP. The RCEP offers an open architecture which allows others to join in. Three ASEAN countries are also members of the Trans-Pacific Partnership (TPP), which is intended to be a new gold standard for FTAs. The TPP includes countries such as Chile, Peru, the US, and Japan, and will knit the economies of Asia-Pacific together in an ambitious and high quality agreement to promote innovation, exports, and growth, and support the creation and retention of jobs.
Brazil's growing ties with Southeast Asia
Brazil has noted this potential for greater cooperation. It is at the forefront in fostering closer relations with Southeast Asia. In the last decade, trade between Southeast Asia and Brazil has jumped more than 350% to reach US$13.3 billion in 2010. Politically, Brazil has appointed an Ambassador to ASEAN and signed the Treaty of Amity and Cooperation.
But we can do much more together. ASEAN's growing middle class has produced a huge demand for capital and consumer goods, energy, food, and travel. They want cars, electronics, fashion, everything. ASEAN continues to have infrastructure needs. ASEAN's energy consumption has grown 3.8% annually between 1995 and 2007, and is expected to grow 4.4% per year until 2030. Rising incomes in ASEAN have also led to greater demand for rice, soy beans, meat, seafood, and processed goods. According to Boeing, air traffic in Southeast Asia is projected to grow at 7.6% per year, due to the liberalisation of air routes and increasing business and leisure travel needs. Brazilian aircraft manufacturer Embraer is now looking to spread its wings in Southeast Asia, given the big market for private airplanes.
Singapore as a good partner for Brazil: the Singapore story
Singapore can be a good partner for Brazil in Asia.
Why do I say this? Singapore's success was not a given. We are a small country of only 3.8 million people, with no natural resources. In 1965, when Singapore achieved independence, our human development indicators were below what was then Ceylon. Our unemployment rate stood at 14%, and our GDP per capita, in current market prices, was US$516. Today it is at US$55,000. What did we do to overcome these problems?
We adopted a multi-pronged approach. First, we developed our human capital. We invested in primary, secondary, and tertiary education. Today, Singapore has a literacy rate close to 100%, and we are exporting Singapore's math curriculum to countries like Chile and the United States. Singapore's universities are consistently ranked among the top universities in the world. We are always looking for ways to improve our productivity.
Second, we managed to achieve socio-political stability for the last 50 years.
Third, the government facilitates the growth of business by ensuring an attractive business environment for foreign investors. Singapore has consistently ranked as the most competitive city in Asia, and among the most competitive countries in the world. Each year, we are ranked among the top countries in ease-of-doing-business indices. Our efficiency is not limited to the private sector. Our government has been one of the first to move into e-services, and we are now a global leader in e-government.
Our economy has moved progressively up the value chain over the years, and matured and diversified in response to the world's needs. The result of these efforts is that Singapore's GDP per capita in 2012 was US$52,051. Although Singapore is the second smallest country in ASEAN, our economy is the third largest. Anything is possible if we focus on investing in human capital and the right framework.
Today, Singapore is a transport, economic, and financial hub. We have negotiated an extensive network of 18 regional and bilateral FTAs with 24 trading partners, including countries such as the US, China, India, Japan, South Korea, Chile, Panama, and Peru. We are a founding member of APEC and the Trans-Pacific Partnership. We have over 40 investment guarantee agreements with various countries, including Mexico and Peru. The Port of Singapore is one of the world's busiest ports, and connected to 600 ports globally. We transship 20% of the world's shipping containers, 50% of the world's annual supply of crude oil, and handle 30 million TEUs of container traffic. Singapore is an Asia-Pacific hub for agri-commodities such as grain and sugar. We are a key hub for trade in metals and minerals, and also the largest oil trading hub in Asia. Changi Airport is one of Asia's best-connected airports, with over 100 airlines flying to more than 200 cities around the world.
Singapore as a good partner for Brazil: New opportunities
There are many opportunities for Brazil in Asia, and Singapore and Brazil can have a very productive partnership in exploring these opportunities. There is increasing recognition of Singapore as a gateway to the broader region. Besides our favourable business climate, we have a strategic geographical location. Half the world's population lies within a 7-hour flight radius. Many multi-national corporations have set up their Asian headquarters in Singapore. A number of Brazilian companies like Vale, Embraer, Petrobras, and Brazil Foods, have already established offices in Singapore. From Singapore, these companies coordinate their businesses and strategies for Asia-Pacific. They also use Singapore as a base to reach Asian investors. To put it another way, Singapore can be a springboard for Brazilian companies in to Asia, and a stepping-stone for Brazil's global champions.
This activity has not been one way. Singaporean companies have also sought opportunities in Brazil. The Keppel Group operates two shipyards – in Angra dos Reis and Navegantes, which employ over 8,000 people. Jurong Shipyard and Sembcorp Marine are set to invest US$550 million in constructing a new shipyard in Espirito Santo. In March 2011, Singapore Airlines choose Sao Paulo as its first South American destination for direct flights between Singapore and South America. Many other Singapore-based companies have also opened offices in Brazil. For a small country like Singapore, our companies together employ over 10,000 people in Brazil. Elsewhere in Latin America, PSA International will be managing the new Mariel Port in Cuba, which is currently being built by Brazilian giant Odebrecht.
Further, there are growing trade and economic ties between Singapore and Brazil. Last year, when Brazil's trade surplus fell from USS$29.8 billion in 2011, to US$19.4 billion in 2012, Brazil's trade surplus with Singapore actually grew by 5.6%. In fact, Brazil's 6th-largest trade surplus comes from Singapore, despite our small size. According to the IMF, Singapore is the 4th-largest Asian investor in Brazil. There are approximately 120 Singapore-based companies, with over 500 points of presence across Latin America. But even with these impressive numbers, there is scope to do much more. Singapore's overall trade with Latin America was US$30.1 billion in 2011, but this only accounted for less than 4% of our total trade of US$785 billion. There is so much more we can do together.
Looking Ahead
Looking ahead, Singapore remains committed to expanding our relationship with Latin America and Brazil. Since 2004, we have hosted the annual Latin Asia Business Forum, which has brought together more than 2,000 business and government leaders over 47 countries from both regions to network and develop opportunities and partnerships. We have also shared our experiences in areas such as public administration, urban development, water management, port management with Brazilian officials through our Singapore Cooperation Programme.
The opening of our Embassy in Brasilia is a concrete signal of our long-term interest in strengthening bilateral relations Brazil and the rest of Latin America. We are very careful about where we open our Embassies. In fact, in the last five years, we have only opened two new embassies – one in Brasilia, the other in Ankara.
Going forward, both sides can and should do more to encourage greater flows of trade, goods, people, and services. We should lower barriers to trade. No country, big or small, can put up such barriers and hope to have a self-sustaining economy. History has shown that such an approach is not feasible. The way for prosperity for our people is to build on our respective strengths and compete in the world.
Our concrete economic links form a firm foundation for the expansion of ties between both sides. The opening of the Embassy and the continued presence of companies in both our countries will lead to even greater, even stronger ties between Singapore and Brazil.
Thank you.
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