Building Links Between Latin America and Asia in an Uncertain World
It is an honour to be here. Thank you for the privilege of speaking today. I will speak frankly so I hope you will bear with me, but I think that amongst friends, and in order to make the discussion useful, we might as well be open and frank.
The first thing I want to say is that relations between Asia and Latin America are very friendly, but to be perfectly honest, they have not fulfilled their full potential. Our regions are divided by great distances - it took me 30 hours to reach here - divided by different historical backgrounds, and divided by language. Speaking Spanish and English is another colonial outcome. But these gaps must change, and the reason they have to change is that in both Asia and in Latin America, we have to restructure our economies in order to meet the challenges of both globalisation and the digital revolution. Our people, whether in Argentina or in Singapore, are all demanding good jobs with good wages. I understand that there is a strike taking place right now, and in a sense, that is also a reflection of this demand for good jobs and good wages and our people are impatient for that. But even as we try to achieve this, it is also the responsibility of governments all over the world to make sure that overall, our economies remain competitive and to do so while the world is changing dramatically and rapidly.
So, there are a couple of things which governments have to do urgently. First, we have to invest in our people, education and training. Second, we have to invest in infrastructure, to make sure that all of us have first world infrastructure in order to allow our people to maximise what they have learned through their training and their skills, and to also unleash the innovation and potential of companies. There is a third dimension, which is to forge new partnerships. That’s really the context of our discussion today. How do we build effective partnerships and build bridges across this great distance between Latin America and Asia?
In a sense the digital revolution has eliminated geography as a barrier. After all, if you have to send an email, it is transferred at the speed of light. Therefore, we have to try to exploit this potential in order to build closer economic links, expand mindshare, and maximise opportunities for companies and people in our respective areas. Let me deal first with the challenges and opportunities in a changing world. We all know, or at least, politicians should know, that there is a rising global tide of protectionism and narrow nationalism, and very often couched in populist terms. This represents the negative reaction against global trade, against economic integration, in fact, against the very process of globalisation itself. We’ve seen the frustrations expressed by people who feel that they’ve not benefited fairly, or not benefited quickly enough, from the processes of globalisation and trade liberalisation. We’ve seen a withdrawal from multilateral trade deals, and calls to move production back home. All this represents the fact that the previous global consensus on the benefits of free trade, on economic integration, on building bridges across regions, this mode of consensus is now under deep stress.
Our countries also face many transnational challenges. For instance, climate change, terrorism, religious extremism, epidemics, these global challenges are reminders that we can’t solve this by isolating ourselves or by retreating behind protectionist walls. We need to recognise that the global economic environment of today is shaped not by developments in any single region, but will be shaped by the major economies in Asia, in Europe, and the Americas. If we think about it, the US and China are currently the two largest economies in the world. In fact, they are the major trading partners for many of us in Asia and in Latin America. In the case of Singapore, China is our largest trading partner, and in fact, Singapore is the largest foreign investor in China. I believe for Argentina, China is probably the second or third largest trading partner.
It’s important to bear in mind that small states like Singapore, with just five and a half million people, or even medium states like Argentina, with 43 million people, the brutal truth is that in the global economy, small and medium sized states are merely price-takers. We are not price-makers. We are price-takers. Therefore, policies and the nature of the relationship between the US and China matter a lot to us. If they have a positive and cooperative relationship, it will be better for us. On the other hand, if there is uncertainty, or worse, if there is a trade war, it will make life very difficult for us. But the point is, we have no say. I think President Xi Jinping has just landed in Florida. He will be meeting President Trump shortly. I’m sure people all over the world hope that meeting goes well, and they achieve an effective modus vivendi, and give stability, confidence and opportunities to the rest of us. But we have no say. We just have to cope and deal with whatever they decide, whatever actions and consequences arise.
Now having said that we have no say when we are engaging with the superpowers, we actually do have a say in our own domestic policies. We do have a say in the way we relate to one another. The point that I wanted to make today is we need to look beyond our traditional frameworks, and we need to find like-minded partners to forge these new paths. That’s really the context of my presence here today. Because we are like-minded, to engage with each other in a significant way requires us to break beyond our traditional frameworks, where we actually do quite well in our respective spheres but we do not sufficiently engage across the barriers of geography, history and language. Actually, these are not new ideas. FEALAC, the Forum for East Asia-Latin America Cooperation, was established in 1999, a long time ago. Its objective was to stimulate interaction and promote greater interaction and linkage between Asia and Latin America. These objectives are still relevant, but the context has changed significantly. It is important for us to maximise what we can in order to step up relations, and we have to do so especially now, when there is a growing anti-trade sentiment in many parts of the world.
It is more urgent that we proceed on this agenda now. We have to make the case that free trade expands opportunities for everyone, and we also need to recognise politically that just having growth, even if it’s a high growth rate, is not enough. The fact is, free trade often has differential impacts on different sectors of society. Therefore, the political challenge for all of us is that even as we pursue free trade, we need to make the necessary domestic arrangements to make sure that no one gets left behind. It is a stark reminder that foreign policy, or trade policy, begins at home.
I want to touch on relations between Argentina and Singapore. We established diplomatic relations more than 40 years ago, in 1974. I’m not sure how many of you have been to Singapore over the years but if you went back far enough, it was quite different from what it is today. One part that hasn’t changed is that we’re still a very small country. We have tried to reclaim land, but even then it is still only about 700 square kilometres. I’m not sure how many thousand times that is smaller than Argentina. We have 5.8 million people. We have no natural resources, no oil, no gas, no coal, nothing. We gained our independence in 1965. To be honest, we didn’t even fight for independence. We were “divorced”, kicked out, and forced to be independent and find our way. At that time, our unemployment rate was 14 percent. Our GDP per capita was about US$500. There was therefore no guarantee that we could survive.
Today, we have survived and thrived. Our GDP per capita has gone up by about a hundred times in 51 years. Our success, we believe, reflects the great investment in human capital, in education, in political and social stability, in building an attractive environment for businesses, plugged into the global network. The government has been obsessed with integrity, with competence, and the fact is that if your people have to work very hard, your leaders have to demonstrate in a transparent way that they are honest, and doing their best. It doesn’t mean you get everything right, but the track record builds up over the years. So a small trading nation, a small entrepot in the heart of Southeast Asia, has now become the regional shipping, transport, logistics, financial and legal hub over 51 years.
The other odd thing about Singapore is, if you look at our trade figures, our trade is three and a half times our GDP. What that means is that when we talk about free trade, to us it is not just negotiations. It is not a debating point. It is our lifeblood. Without free trade we would be in deep, deep trouble. Because of that, we have been strong proponents of the WTO process. But I’m sure you all know that has been a very laborious and difficult process. We could not wait for the WTO to settle the multilateral process on a global scale. We have had to pursue an extensive network of free trade agreements. If you think about Argentina again – it is much larger than Singapore. I believe you have the third largest economy in Latin America. I don’t need to tell you that you have an abundance of land. You told me just now, in terms of land area, it’s the whole of Western Europe excluding Russia. And in all that land, you only have 43 million people. You have been richly blessed with natural resources, including recently, the discovery of shale gas, which I believe you now have the world’s second largest reserves of, and the fourth largest reserves of shale oil. So you are a very blessed country.
Relations between Argentina and Singapore have been friendly, but to be honest with you as I said earlier, despite this friendliness, despite this similarity in outlook, we have not yet done enough together. We have not yet exploited all the opportunities that our friendly relations and strategic alignment should have allowed us to. But I’m here now because I believe the timing and circumstances are right, and I believe the political will is in place, and the economic interests of businesses are aligned. We have signalled our intention to step up our engagement in a big way. Argentina is currently Singapore’s 7th largest trading partner in Latin America. Bilateral trade is about US$240 million, which frankly is a very small number. It should be many, many multiples of that. Argentina’s economic and structural reforms, I believe, have created potential to boost bilateral trade and investment flows significantly. Just now, when I met President Mauricio Macri, I said, given time, the policies that he has instituted will have a major impact on attracting investments, trade and give an economic boost. But it sometimes needs time, and he was expressing his impatience that the fruits of these policies need to be harvested early in order to maintain the political momentum for these changes that he is trying to implement.
Some Singapore companies are already in Argentina. For instance, PSA, the Port of Singapore Authority International, already operates the Exolgan Container Terminal in Buenos Aires. I believe this is one of the larger and more efficient terminals. Olam Argentina runs an integrated peanut supply chain, and has expanded into soy, corn, beans and rice. This is, as I said earlier, my first visit as Foreign Minister to Latin America, and we’ve also appointed a new Singapore Honorary Consul-General in Buenos Aires.
We are looking forward to Foreign Minister Susana Malcorra visiting Singapore in July this year, where she will open – actually I should say re-open an Argentinian Embassy in Singapore, because there used to be an embassy right from the early years until about 2002 when it was closed. We will have an Argentinian Ambassador in Singapore again. I believe this will make a difference to engaging our businesses, our Singaporeans, and expand opportunities on both sides. There are possibilities to do more – not just in trade and investment – but also for us to work together on third country technical cooperation, food security and safety, student exchanges, and interesting and innovative projects for the digital economy. We believe that these steps will take our relationship to a much higher level.
I am very encouraged that Argentinian companies such as Tenaris and Grupo Bagó have already leveraged Singapore and are using us as a gateway to Asia. Because Singapore is so small, all foreign companies who come to Singapore are not only targeting the Singapore market, but they are really targeting the much larger Asian and Southeast Asian market. We believe this makes a compelling case because of our strategic location, and if you look at the flight routes, half the world’s population lives within a seven-hour flight radius of Singapore. Singapore is a capital exporting country. As I said earlier, we are the largest foreign investor in China. We are also one of the largest foreign investors in India, and in several ASEAN countries.
So basing your companies in Singapore, networking with us, I believe, will help you navigate the business and investment opportunities throughout Asia. We offer a business-friendly and favourable investment climate, a strong rule of law, sanctity of contracts, intellectual property protection, and an educated and highly skilled workforce. Our union membership is growing, but strikes are very infrequent. In fact, our special tripartite relationship between the unions, the employers and the government is one of the secret recipes to competitiveness. It’s worth coming to study us. We are also plugged into regional markets, operating environments and business networks, and many thousands of multinational corporations from America to Europe in fact have their regional headquarters in Singapore, and use Singapore as a base to access the Asian market, investors and consumers. So I’m really here to do a sales pitch to encourage Argentinian companies to use Singapore as a springboard into Asia. And I’m also here to tell you all that we’ll be happy to partner Argentina, and share our experiences, and seek new opportunities for your companies.
We see abundant opportunities in Latin America and Asia, not just as alternative markets for exports and services, but also to learn from each other and leverage each other’s networks, our strengths and our expertise for mutual benefit. That is also a reason why Singapore became an observer to the Pacific Alliance, and why I’ll be meeting the Foreign Ministers of Mercosur tomorrow. Given the current uncertainties, I am trying to make the case that there should be a free trade agreement between Singapore and Mercosur. I’ll convince them tomorrow. I believe that if we can succeed in making a progressive step on this, we will send a positive signal to the world that we are open for business, we still believe in free trade, and economic integration will bring great opportunities to our people and our businesses. The point here – I say this because my ASEAN colleague is here as well – is that when we ask Mercosur to consider a free trade agreement with Singapore, this is only a starting point because the real objective is hopefully to get a Mercosur-ASEAN free trade agreement. So, we should take baby steps with us as a pathfinder, an initial step to open the path to a much longer and broader journey.
Let me talk a little bit about ASEAN. Southeast Asia and the ten of us who are members of ASEAN, are really a key part of the Asian success story. ASEAN has immense untapped potential, and remains a bright spot. We sit strategically between China and India, and across several strategic shipping lanes. We are rich in natural resources – actually everyone is rich in natural resources in ASEAN except Singapore. ASEAN as a whole has a large and young population of 628 million. That’s actually a European-sized population, a population that is skilled, optimistic, has a rising middle class, rising incomes, and is hungry for food, energy, new goods and services.
ASEAN remains a bright spot despite the relatively anaemic growth on the global scale because, for instance, the average growth in ASEAN is about 6% compared to the global average of only 4%. The other fact is the population in ASEAN remains young, and we have not yet harvested the fruits of this demographic dividend. We have formed an ASEAN Economic Community. This was established in 2015 to create a single market, a single production zone and a single investment destination. Today we present a combined GDP of US$2.5 trillion. But this will quadruple to US$10 trillion by 2050. If we succeed in doing that, we will become the world’s fourth largest single market, after the US, EU and China.
We will be a compelling trade and investment partner. That’s why we want to persuade Argentina and Latin America to look – I think it is to look East – and to Southeast Asia. ASEAN also has a wide network of free trade agreements, and one major free trade agreement we’re negotiating right now is called the Regional Comprehensive Economic Partnership. This will be a multilateral free trade agreement that includes all the ten countries of ASEAN plus our dialogue partners, including the two massive economies of China and India. This will be a free trade area with a combined GDP of US$17 trillion, or one third of global GDP. So again, there is huge potential for Argentinian companies.
I’m very glad that Argentina has applied to accede to the Treaty of Amity and Cooperation in Southeast Asia. Needless to say, Singapore will fully support Argentina’s application and I believe this is an important step for Argentina to engage ASEAN.
Argentina is currently the pro tempore President of Mercosur and I believe with its current leadership and its current set of policies, we sense a major change in the orientation and the outlook of Mercosur. On our side of the world, Singapore will be the Chairman of ASEAN in 2018. That’s all the more reason that whatever we do between Argentina and Singapore will have potential implications on what we do in Mercosur and ASEAN. We need to find new ways and more effective cross-regional cooperation which I believe will deliver rich dividends in the years to come.
Singapore and Argentina have also cooperated well in multilateral fora at the UN. We’ve supported each other where our interests are aligned, and we will continue to find platforms where we can do more together. In today’s world, we need diverse players to come together and facilitate solutions in a constructive way. I’m glad that Argentina will hold the G20 Presidency in 2018. Singapore has made useful contributions and played an active role in past G20 meetings as the Convenor of the Global Governance Group. The Global Governance Group has helped to channel the views of a broad range of countries to the G20, making the G20 process more inclusive. We have served as a bridge between the G20 and the wider UN membership. So we look forward to continuing to work with the G20 through Argentina, and particularly to focus on topics including infrastructure, and sustainable development. This morning, we were discussing the need to prepare our people for the digital economy: new jobs, new skills, new education, new training that needs to go with it. There’s a lot to be done, and we look forward again to working and collaborating in this area.
Let me just conclude by emphasising that there are many, many opportunities. These opportunities should have been tapped a long time ago, but it’s better to be late than never. Given the circumstances in the world today, with all the challenges and all the changes, even with the pushback against free trade and economic integration, there are bright spots. Argentina and Singapore, Mercosur, Latin America and ASEAN and Southeast Asia, by building bridges instead of walls, we can work together, we can encourage and turbo-charge greater flows of trade, goods, people and services, and ultimately provide and improve the welfare of our people in our respective regions.
Thank you very much for having me here.
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MINISTRY OF FOREIGN AFFAIRS
SINGAPORE
7 APRIL 2017