Thank you for inviting me to deliver the lunch keynote at this year’s Nomura Investment Forum Asia. I am very happy to be addressing this distinguished audience for the first time. The topic I have been asked to speak on is “Navigating Geopolitical Risks”. I understand that the focus of the Nomura Forum has typically been about investment strategies and developments in markets across the world.
The choice of topic today reflects the current reality that understanding geopolitical risks is now a shared endeavour between governments, businesses, experts, and researchers.
We are indeed living in tumultuous times. The global environment has become more volatile, unpredictable, and fragmented. Singapore is a country where trade is three times our GDP, so we are highly sensitised to every possible dislocation.
We are transitioning from a unipolar to an asymmetrical multipolar world order. In particular, we are seeing increasing geopolitical contestation, especially between the US and China.
The situation across the Taiwan Strait remains one of the most dangerous flashpoints in our region. We hope that all parties can find a way to engage in dialogue, build trust and pursue cooperation that will contribute to peace and stability in the region.
Singapore has also been watching recent developments in the South China Sea with concern. Singapore is not a claimant state, and we do not take sides in the competing territorial and maritime claims. We hope that all parties will maintain open channels of communication, preserve regional peace and stability, and manage their disputes peacefully, in accordance with international law, including the 1982 United Nations Convention on the Law of the Sea (UNCLOS).
Meanwhile, outside Asia, two on-going wars are the focal points of global attention. The war in Ukraine is into its third year, having wrought severe devastation and also having had serious implications on global inflation, including energy and food prices. Singapore will be participating in a Summit on Peace in Ukraine to be held in Switzerland later this month and we hope for positive progress.
The Israel-Hamas conflict has resulted in an appalling humanitarian tragedy. Recently, on 31 May, US President Biden announced a 3-phase proposal towards a permanent ceasefire in Gaza. We welcome this initiative and hope all relevant parties will seize the moment to reach an agreement and put an end to this humanitarian suffering that has gone on for too long.
In the Red Sea, which is a major Sea Line of Communication, ongoing attacks by the Houthis have disrupted supply chains and threatened the safety and freedom of navigation. All these developments pose significant geopolitical risks, which in turn affects the global economy.
A key source of risk is the fact that the rules-based international system which has undergirded global peace and prosperity for the past few decades is being challenged.
The global economy is being reshaped at a scale that has not been seen since the end of the Cold War. The international consensus supporting multilateralism and globalisation is fragmenting. Countries are increasingly prioritising domestic and national security considerations. There is growing protectionism, as countries increasingly employ tariffs and export restrictions to protect their domestic industries.
We are also seeing increasing on-shoring or friend-shoring. Policies such as sanctions, export and import controls, and investment restrictions have also become more common. These have forced businesses to restructure their operational models and shift supply chains.
To some extent, this is understandable given the supply chain vulnerabilities exposed by the COVID pandemic. But turning our backs on free trade results in rising economic costs, negative impact on the exchange of ideas and innovation, and capital flows. This has serious implications for small, open economies such as Singapore that rely on trade and investments and a common set of rules that apply to all.
Just like governments, I am sure that many of the businesses present today are preoccupied with how to deal with heightened geopolitical risks. Allow me to take this opportunity to share how Singapore is doing so.
First, we will continue to be guided by Singapore’s national interests. We will develop our strategies in a way that is consistent and principled.
I mentioned increasing geopolitical contestation, especially between the US and China. From Singapore’s perspective, given our extensive and substantive relations with both the US and China, an adversarial relationship between the two narrows the space for us to work with both countries and advance our interests. A world in which the US and China can coexist peacefully is a safer and more prosperous world for many countries, including Singapore.
We are encouraged that both sides have continued to demonstrate their commitment to maintain open lines of communication. There have been various high-level visits and exchanges between both sides, and just a few days ago, their defence ministers met on the sidelines of the Shangri-la Dialogue here in Singapore.
The US and China need to exercise global leadership to address global issues such as climate change, global macroeconomic stability, public health, and food security, among others. I am glad that there has been recent cooperation on issues like counternarcotics, dialogue on AI safety and risks, as well as enhancing climate action.
However, the US-China relationship continues to be marked by deep mutual suspicion and fundamental distrust. Until and unless this changes, it is hard to imagine any significant improvement in the quality of the world’s most consequential bilateral relationship.
Complete decoupling at a global scale may seem impossible given how tightly interwoven the linkages between economies already are. But we have to accept that some degree of fragmentation is already taking place, in sectors like semiconductors, AI, and telecommunications. This will be difficult to roll back.
Some observers have characterised Singapore’s approach towards major power rivalry seeking to “balance” between the US and China or staying “neutral”.
However, Singapore’s approach is, in fact, neither; we do what advances our national interests. While we try our best to work together with all countries, no two countries have national interests that are perfectly aligned.
At present, it remains possible for Singapore to maintain strong ties with both the US and China because our national interests overlap significantly with those of each of these big powers.
But these conditions may change. If and when they do, the decisions that Singapore makes would have to still be guided by our national interests. We may have to say or do things that some countries, including the US and China, may not agree with.
Second, Singapore has, and will continue, to advocate for and strongly support efforts to strengthen the rules-based international system.
Despite its flaws, we have to work within the existing multilateral system based on international law, because this is what stands between us and a world in which “might is right”.
As a small state, we appreciate this deeply. This is why we stand ready to help keep the multilateral system functioning, or better yet, help improve it.
How do we do this? Well, for example, the WTO is the bedrock of the rules-based multilateral trading order. For more than 7 decades, the WTO and its predecessor, GATT, have underpinned a sustained period of global growth, stability, and prosperity, by establishing norms that govern the international trading relationship and encourage trade liberalisation.
We recognise that the WTO is not perfect. But it still provides the foundation of rules that govern free, open, and non-discriminatory trade for all. A breakdown of the WTO would benefit no one.
Hence, it is imperative for us to maintain the core functions of the WTO, such as the Dispute Settlement Mechanism. We must work towards the restoration of a fully functioning Dispute Settlement System. The WTO must also regularly update its rules to ensure it remains relevant in a rapidly changing global economy.
We should find ways to inject dynamism and foster greater convergence, including by accommodating fair concerns where they exist. The concept of “flexible multilateralism” is one way in which we can do so.
Plurilateral initiatives such as Joint Statement Initiatives offer an innovative and creative modality for WTO rules to keep up with the evolving global trading environment, and allow interested Members to move ahead on important issues, while ensuring that the negotiations remain open and inclusive for others to join when they are ready.
For example, Singapore, together with Japan and Australia, is a co-convenor of the WTO Joint Statement Initiative on E-Commerce, which aims to establish the first set of global baselines rules on digital trade.
Through flexible multilateralism, the WTO will be able to respond in a nimble and timely manner to new and emerging issues such as digital trade and environmental sustainability.
Third, Singapore is looking at other ways to support the rules-based international system. We are pursuing novel economic partnerships that go beyond traditional trade agreements, to address new and emerging economic issues and facilitate broader economic cooperation, such as the Indo-Pacific Economic Framework for Prosperity (IPEF) and the Digital Economy Partnership Agreement (DEPA).
IPEF fosters cooperation among 14 partners to advance our shared interests in areas such as supply chain resilience, the clean energy transition, decarbonisation, and sustainable infrastructure.
Singapore is hosting the inaugural IPEF Clean Economy Investor Forum and Ministerial Meeting tomorrow. The Investor Forum will bring together key investors, project proponents, and startups from the Indo-Pacific to mobilise investments into sustainable infrastructure projects and climate technology.
As for DEPA, it is a first of its kind agreement that establishes new approaches and collaborations in digital trade issues, promotes interoperability between different regimes and addresses new issues brought about by digitalisation.
Last month, we welcomed the ROK as the first new member of the DEPA since the agreement concluded in 2020. We are also heartened by the keen interest shown by aspirant economies who have applied to join, such as China, Canada, Costa Rica, Peru, the UAE, and El Salvador.
This is a testament to the DEPA’s vision, standards, and ambition in bringing likeminded countries together to support the rules-based international system.
Fourth, Singapore will continue our efforts to diversify our economy and strengthen our international position.
A successful ASEAN is key to this. Southeast Asia remains a bright spot with its robust economic growth amid an uncertain global economic landscape. The region is projected to grow more quickly than the global economy over the next five years.
In 2022 alone, Southeast Asia’s combined GDP amounted to US$3.6 trillion, and is projected to grow to US$4.1 trillion by 2035. In the next two decades, it has the potential to become the 4th largest economy in the world.
Southeast Asia also has a combined population of over 660 million of which half are under the age of 30. This is potential for a significant demographic dividend.
In an increasingly uncertain global environment, ASEAN countries remain committed to enhancing regional economic integration. Not only does ASEAN have extensive free trade agreements (FTAs) with external partners, all ten members are also part of mega-FTAs such as the Regional Comprehensive Economic Partnership (RCEP) which accounts for 30% of the world’s GDP.
ASEAN has also expanded cross-border digital financial services, which will pave way for inclusive growth and better trade opportunities for ASEAN’s businesses.
Beyond trade, we are also looking at the next frontier of ASEAN’s integration: The digital and green economies. We will conclude the ASEAN Digital Economy Framework Agreement (DEFA) in 2025, which would facilitate a more seamless cross-border digital trade ecosystem across the region. A high-quality DEFA could reportedly double the potential value of the region’s digital economy to US$2 trillion by 2030.
The green economy is another important area of cooperation for ASEAN to build a more sustainable economic future. Singapore is working with our regional neighbours to support the development of the ASEAN Power Grid. The Laos-Thailand-Malaysia- Singapore Power Integration Project (LTMS-PIP) which imports up to 100 megawatts of renewable hydropower from Lao PDR to Singapore is a pathfinder towards an eventual ASEAN Power Grid.
Green financing, carbon services and trading are some of the other examples of new industries under the green economy. Over the next 5 years, the market for renewable energy in ASEAN is expected to grow more than 7% per annum. Unlocking Southeast Asia’s green economy could be worth US$300 billion annually by 2030.
Despite the geopolitical environment, I believe that ASEAN has the potential to be a centre of gravity of the global economy, and where many companies will want to be situated.
Being at the heart of this part of the world, this is positive news for Singapore. The global situation remains uncertain, and it is likely that the transition from a unipolar to multi-polar world may take some time, decades even. Amidst established norms eroding, the world is searching for new bearings.
However, the Singapore Government is prepared for the long haul. We remain confident in the prospects for the region. And we are prepared to journey through this phase of global uncertainty with our people and the businesses located here. Thank you.
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DIALOGUE SEGMENT
Q: Thank you very much for the excellent remarks and insights that give an integral perspective on a very complicated geopolitical landscape. I will start with a domestic-related question. We just had, in Singapore, the leadership transition with Prime Minister Wong taking over. What do you see as his priorities, encompassing both foreign and trade policy? In which areas do you see that he can introduce some changes, if any?
A: We have just had a leadership transition from the third to fourth prime minister. It is fair to say that it took place with no drama, and that is how we would like it to be. Leadership transitions are important. We would like it to be predictable. And Prime Minister Lawrence Wong will continue this spirit of consistency in the way he steers both our foreign and domestic policy. In fact, he has also been very active in engaging the public on the priorities that he put forth. That is encapsulated in the spirit of Forward SG, an exercise that he has led. Forward SG addresses what we need to do as a nation, what individuals, communities, organisations, and stakeholders in the economy can do together to navigate an increasingly uncertain world, and in galvanising more actions on the ground and unleashing the potential for more good ideas. PM Wong has been very clear about that. In this spirit of continued evolution, there would be no breaks or surprises from the past. I think that has been the hallmark of past transitions and I believe that it will be for this one as well.
Q: The second question is on international cooperation, as a way to counter the risks of more economic fragmentation and deglobalisation. I’m curious, when you are attending global forums to talk about these issues, where are you most optimistic in terms of where progress can be made, in order to maintain a rules-based multilateral trading order? What do you see are the key issues and main elements that are preventing us from going in that direction?
A: Singapore has always been a very clear and consistent supporter of the rules-based, multilateral system. This includes supporting the trading system and economic linkages, rather than fragmentation thereof. Our approach is always to be very aware of the trends that may or may not support globalisation. We do our best to work with like-minded partners to move ahead on issues that require cooperation. The impetus for further integration has not completely disappeared, it’s still there. For example, the case for us to work together on issues like climate change has a very broad consensus. The question is how. And because of technological changes, there is also a lot of global interest in working together, to give an example, on AI problems. These are areas in which Singapore, when we are called upon, or when there’s an opportunity to do so, seeks to be active and constructive in helping to uphold the global commons. This is a very consistent approach that we take. To give another example, many of the investors in business know that Singapore has always been very closely associated with UNCLOS. Very recently, our Ambassador Rena Lee presided over the conclusion of an agreement at the UN which is very closely related to UNCLOS, which has to do with biodiversity beyond areas of national jurisdiction in the ocean. This is an area of global commons rule-making that we are very honoured and glad to take such a constructive role in. We have a Singaporean who is leading the World Intellectual Property Organisation (WIPO). Our Permanent Representative at the UN Burhan Gafoor is also leading the Open-ended Working Group on Cyber Security. We put out a model framework on AI governance, including generative AI. The list goes on. But these are the ways in which we seek to, despite our small size and limited resources, play a constructive role. We hope that the global commons will work better and can inspire more confidence in stakeholders.
Q: Staying in the region and on the issues in the South China Sea, we are interested to hear your views on how you see this playing out. Are the tensions elevated and a little bit more worrying now? And specifically, when you are speaking to your ASEAN counterparts, how difficult is it to come up with a more unified approach to try and resolve issues that are happening with China?
A: I named two hotspots in the Asia-Pacific just now. One is the Taiwan Strait, the other is the South China Sea. I should state first that Singapore is not a claimant state. Within ASEAN, we have a position on the South China Sea but the reality is that not all ASEAN Member States are claimant states too. In the specific perspectives, there will be some differences. We are also working on a Code of Conduct between ASEAN countries and China. I think that there is a general agreement that what’s very important is to safeguard the freedom of overflight, the freedom of navigation, and to resolve any potential disputes in accordance with international law, and that includes UNCLOS. We also hope very much that any mishaps or miscalculations can be avoided.
Q: On US-China relations, how do you see that also playing out, ahead of the US elections, and beyond the elections? Do you see a scenario where tensions start stabilising or increasing?
A: We all hope that tensions do not increase or that they are alleviated over time. What are the encouraging signs? I think encouraging signs right now are that, between US and China, there is more contact and high-level exchanges. This shows a shared understanding and commitment to keep the lines of communication open. To us, that is definitely better than not talking and not meeting. In terms of the longer-term trends, it remains very concerning because of how each of these big powers view each other. Within the US, I think the identification of China as not just a competitor, but as a rival, and perhaps more than a rival, now has bipartisan agreement. This position would not be easy to reverse or to change. From China's perspective, they have spoken out on a sense of being encircled or being contained by the US. So this mutual perception speaks to a lack of strategic trust. This is something that is very concerning. We have also been sharing with our friends in the US and China our view on the issues. We hope very much that the alleviation of tensions will continue, but ultimately, whether there can be a rebuilding of strategic trust is very much dependent on domestic factors in both of these big powers.
Q: In an environment where trade protectionism continues, what is Singapore’s perspective and approach? How does the Government implement policies to try and de-risk the impact of trade protectionism on globalisation?
A: For protectionism, we are consistent with our approach in support of free trade. We see increased protectionism potentially leading to less prosperity for all. But we also understand some of the reasons why domestic support in quite a number of economies, including very large ones, is eroding in terms of how they view free trade or global integration. From Singapore’s perspective, we do see that full participation in the world economy would necessarily mean, from time to time, economic changes or rotations. We cannot speak for how others handle these rotations or these changes; but the way we see it in Singapore, this has to be accompanied by very active efforts on the part of the Government first, to cushion vulnerable segments of society from the vagaries of economic changes. In our case, it means building up and further investing in social safety nets. It also means some degree of redistribution through taxation and transfers, so that those who are less able to look after themselves will be helped by those who can. Very importantly, we believe in investing in reskilling and upskilling. At the domestic level, sometimes you will see industries grow and expand, and there will be some industries that perhaps go the other way. They may shrink. Some companies will come into being. Some companies will also exit the market. This is part and parcel of the full participation in global trade and investment flows.
At the individual level, there will be exposure to these dislocations, with implications for job security, income security. And we see investing in, first, education for all, but very importantly, lifelong learning and reskilling, as helping Singaporeans remain nimble and able to make the best of economic opportunity. So that they will not to be left behind by some of the dislocations that may inevitably occur, by the fact that our economy is so open and exposed to international flows. I think both can happen. On the one hand, remain in an open trading system and very integrated global economy, but on the other hand, there is a lot of domestic policy to cushion some of that impact on our population. That is the approach that we take.
Q: How are you communicating to the public the Government’s foreign and trade policy on dealing with these risks?
A: The changes, or the risks, that we have been talking about, we have also found it necessary to first help Singaporeans understand what they mean. In terms of foreign policy, we have found it necessary to address perhaps some long-held perceptions, which might not be an accurate description of our foreign policy. To give you an example, there is this idea that our foreign policy is primarily driven by the need to balance between the great powers. I explained a little bit of that in my remarks. Sometimes it seems that commentators have a perception of Singapore as a gymnast on a balance beam, making sure not to fall off and being balanced in terms of our relations with great powers, particularly the US and China. But the difficulty with this analogy is that should it be that one day, we could make foreign policy decisions that do not accord with one or maybe even both of the two powers., Then the commentators feel that the gymnast has fallen off the balance beam and see that as a failure of foreign policy. So we want to explain to Singaporeans that actually, it is not a balancing beam and we are not a gymnast. We are able to have good relations with the US and China because our national interests overlap with both the great powers. But these overlapping interests, no one would ever say that is going to remain. And if those conditions change, then we would have to, as always, be guided by our national interests. We hope to help people understand that, and then to also explain, what our interests are. Because of our small size and the lack of resources, and the fact that we uphold a secular, small, multiracial, multireligious meritocracy, we will be very focused on rules-based, open trading systems. And we would also be very focused on pursuing the interests of Singaporeans as a whole, not specific groups of Singaporeans, but policies that apply to the whole of society. These are our national interests. And we will continue to message proactively and help Singaporeans understand this because only a very strong understanding of that will that help us navigate future turbulence in terms of international relations.
Q: May I ask about the Government’s level of confidence that US and China would avoid conflict over Taiwan?
A: I do not think it's in the interest of any particular country, whether we are talking about the US or China, to see conflict. The challenge is to avoid miscalculation and mishaps. For Singapore, we have been very clear, we have our One China policy, we are opposed to Taiwan independence. We hope that all sides continue to keep channels of communication and dialogue open, and that there are ways to ways to prevent that mishap from happening.
Q: On the WTO which you mentioned before, how can Singapore help the WTO when countries like the US engage in protectionism?
A: We always try to look at the WTO as a structure and collection of rules, and we see how we can help strengthen that. Just now I mentioned, for instance, the importance of having a fully functioning Dispute Settlement Mechanism, because without that, it would be very difficult to then deal with deviations from aggrieved actors, including WTO members. At the same time, we recognise the need to move forward on issues that perhaps not all members are ready to move together on. These are the ways which we hope to keep the WTO relevant. We also seek to uphold or support a general commitment to trade. This points to some of the arrangements outside the WTO but nevertheless very consonant in terms of their objectives, such as working with likeminded partners on DEPA. That is one example. The CPTPP, which really started as an agreement between four economies, including Singapore, has also now grown. We feel that by taking part in some of these arrangements, like keeping trade architecture open and inclusive, we also hope to be able to bring in more economies and stakeholders, and in so doing, amongst partners and disagreements, we realise that the economic benefits for our respective economies and peoples, and strengthen that general commitment towards trade.
Q: Shifting gears to the theme of our conference, which is “The Great Supply Chain Migration”, diversification is a key issue for the region. How do you see that affect Singapore. Is it boosting economic transformation that the Government has been trying since 2010, or is it causing a little bit of a tailwind in towards fragmentation of the economy?.
A: Supply chains are being redistributed. This means shifts in industry or at the firm level in the economy. Singapore’s approach has always been, we want to serve the region effectively as a hub. A hub for connectivity, trade flows, and finance. To that extent, we are very sensitised by the changes in these industries or big firm shifts. I'm also conscious that sometimes analysts, or media commentary, talk about it in terms of win-lose. Some industries or big firms shifts might be perceived as one economy winning and another economy losing. But for Singapore, our DNA is that of a free trading port. As free traders, we do not blame the rules. We play the game. For us, win-win is still best captured by a globally integrated global trading system, and not one that is fragmented, or one that looks more like blocs. While with competition, you will always see some amount of dislocation, some shifts in terms of industries or firms. But if the underlying cause for these changes is a decrease in commitment to global trade and the rise of protectionism and more fragmentation, then I would say that at a macro-level, we would be very concerned about that because we will then have lower levels of welfare gains across the board, higher costs to consumers, and lower returns over the long run to investors. That’s the thing for an open economy like ours. So we tend to not be too distracted by comments about win-lose, we want to bring win-win, and we are very consistent in supporting countries’ global economic integration into the rules-based trading order as the best course of action.
Q: On this specific issue of the Johor-Singapore Special Economic Zone and on cross-border integration, do you have any thoughts in terms of how likely this is going to progress, and on the timeline for this?
A: We have made some good progress in discussions with Johor. The case for more economic linkages between Singapore and Johor is very strong. We have also identified some initial initiatives that we think can bolster the success of the SEZ in terms of passport-free QR code clearance system for personnel, and in terms of digital economy. We will continue to work closely with our Johor partners on this, and we hope to be able to move as quickly as we can, because the economic case is very strong. We believe that this is better not just for investors and firms but also in terms of the people-to-people relations, which are already very strong.
Q: I guess that’s in line with your win-win take on economies.
A: Absolutely.
Q: Do you see Singapore’s economy being a larger source of FDI for the region. I’m curious if you have interactions with local companies that are looking to invest as well. Are there discussions of geopolitical considerations when making decisions to build or to invest somewhere?
A: Geopolitical considerations are very much on many analysts’ and newsrooms’ minds. I’m also thinking about this a lot, coming to forums such as this and listening to the views of business leaders, listening to the views of researchers, people who are watching different markets very intensely. But in terms of whether Singapore will become a bigger source of FDI globally, it depends a lot on industries and businesses. What we are trying to do is to serve the region effectively as a hub, and we hope that by being able to add value to businesses and investors, they see a reason to be here. Our focus is always on being able to say that this is our capacity to be useful to the rest of the world. The rest is going to be up to businesses.
Q: You mentioned the green economy. Do you have any thoughts in terms of climate initiatives, what is Singapore’s role in encouraging the region to build capacity in the green economy?
A: I think we must be very intentional in the region for collaboration in terms of green energy transition. We have ourselves made an improvement, and in terms of our neighbours, this is very much on their mind. We also see a lot of complementarities because many of our neighbours have great potential in terms of renewable energy generation, and so forth. There are very good opportunities for companies and investors that are looking into the green energy space, in terms of climate change and the world. Because in terms of the transition and infrastructure needs, it's very substantial and Singapore will work with neighbours to play a constructive role. Last but not the least, in terms of research and development, we see a lot of potential there. This is where we hope to be a good base for companies that are involved in the technological space, where it intersects with climate change and renewables. We hope to engender good innovation in these areas, better yet in partnership with our neighbours.
Q: In terms of the geopolitical flashpoints that you mentioned, which one are you most worried about? And where do you see Singapore can play a role in mitigating these?
A: There are many flashpoints and actually each and every one of them at different geographical locations are deeply concerning in their own way. What I worry about is an internal flashpoint, which is the degree to which domestic obligations in different countries and economies allow us to maintain cohesion in the face of all these dislocations. Are we able to maintain a commitment towards trade, towards economic integration? Because you see this commitment, or even understanding, of markets and institutions, eroding in many places. You see it in different forms. Some people see markets and trade as being increasingly antithetical to achieving social economic equality, to achieving a responsible attitude towards the environment. It need not be so. I do not think the free reign of markets can be completely left on their own. We see the need to mitigate certain outcomes from the markets, and just now I mentioned the importance of social safety nets, upskilling, and cushioning people who are vulnerable in segments of society from the impact of free trade and market forces. But should there be an across-the-board reduction in world trade, in people’s belief in the importance of economic collaboration, then I think as an entire world, we are going to be very much worse off. Can political parties talk about free trade and still get elected? If increasingly that is not possible, then I think we are going to be a lot worse off. Of course, politicians think they cannot do so. But in Singapore, because of our DNA as a free trading port and our dependence on global trade, we cannot contemplate being in that kind of situation. This is the reason why we work very hard in the various aspects to shore up support for the multilateral trading system, to try to be constructive as much as we can.
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