Speech By Mrs Lim Hwee Hua, Minister In Prime Minister's Office And Second Minister for Finance And Transport, At Lloyd's 360 Risk Insight25 Oct 2010
Ladies and Gentlemen,
1 I am pleased to join you today at the Lloyd’s 360 Risk Insight seminar on Globalisation.
Implications and risks of globalisation in Asia: a government perspective
2 Globalisation is fast becoming synonymous with economic growth. Governments and businesses alike face the constant challenges of pursuing globalisation, whilst grappling with the uncertainties and risks associated at the same time. This is no less evident in Asia. I will share with you my thoughts about the evolving role of Asia and how it can adapt to meet the risks of globalisation.
Asia leading Global Economic Growth
3 Asia has catapulted to the forefront of globalisation over the last two decades, as economies opened up to trade, information and people-to-people exchange. The confluence of greater geo-political and macroeconomic stability presented a promising platform for Asian economies to ride the wave of globalisation.
4 Post financial crisis, most of Asia has registered a strong rebound in economic activities in the first half of 2010. This is testimony to the resilience of domestic demand, swift policy response to the crisis and the strong underlying economic fundamentals, which were tested and refined through years of reform after the Asian Financial Crisis about a decade earlier. This is the first time that Asia has led a global economic recovery. Intra-Asian trade and investment alone are growing more rapidly than Asia’s trade with the rest of the world. By 2020, Asia is expected to account for about 43 percent, or almost half, of global GDP, 35 percent of global exports, and 20 percent of global outward foreign direct investments. Asia is now a dominant player and driver in its own right, reflecting a significant shift in global economic activity and predominance.
5 Just two decades ago, the developing countries of Asia accounted for only one-sixth of world output. With many countries in the region adopting sound domestic economic policies and recognising the prospects of greater utilisation of domestic savings and foreign direct investments, Asia (ex Japan), now accounts for close to one-third of world GDP. That is comparable in size to the economies of the United States and Europe.
6 As the global economy recovers, growth prospects in Asia will in turn present businesses and investors with many opportunities. The Asian Development Bank has upgraded projected growth estimates for the region from 7.5 percent to 7.9 percent for the first half of this year. If such a momentum is sustained, the International Monetary Fund predicts that in the next five years, Asia-Pacific’s economy will be about 50 percent larger than it is today in terms of purchasing-power-parity.
Other Merits of Globalisation
7 Globalisation has undoubtedly opened doors of development to segments of societies and economies which were previously closed. This has brought about improvements to the quality of life, helping millions out of poverty. Indeed, over the past few decades, China reported, on average, an annual growth rate of 10 percent. The World Bank estimates that as a result of this, some 500 million Chinese people have been lifted out of extreme poverty in the last two decades.
Risks of Globalisation
8 Globalisation is, of course, not without its own set of implications or even woes.
9 Unprecedented economic connectedness also means greater inter-dependence. Capital fluidity, as experienced in the wake of the recent global financial crisis, has meant that emerging markets have received the bulk of capital inflows from the developed economies. The return of capital is generally a positive development. However, such fluidity could also wreck business plans with inflationary pressures and the risk of asset bubbles. Because of the world’s inter-connectedness, governments and businesses have to react with even greater speed to anticipate, plan and deal with such contingencies.
Strategic Futures Thinking and Emergent Risks
10 Today, we are increasingly confronted with a multitude of risks. There is an increased frequency of risks even from traditional areas such as health pandemics, food security, water supply shocks due to extreme weather conditions, as well as unconventional threats such as terrorism. These call for more forward planning and coordination to deal with such threats as far as possible.
11 The insurance industry plays an important part in helping governments and businesses better understand and manage risks - from supply chain and trade disruptions to the more recent phenomena such as the impact of policies and plans on climate change.
12 Indeed, I am pleased that Singapore is a key insurance centre within Asia and is home to many insurance and reinsurance groups. Singapore aspires to be the region’s centre for more specialised and complex risks such as marine, aviation, energy, trade credit and political risks. Supporting the development of the re-insurance industry is a thriving ecosystem of both global and local brokers, as well as loss adjusters, claims handlers, specialized lawyers and consultants.
13 Singapore's success as a key insurance centre is premised on a robust supervisory framework amid a pro-business environment. For example, we recognise the unique nature of Lloyd's of London as a marketplace and specialty re-insurer. Due to Lloyd's unique structure, MAS had developed a different regulatory framework, the Lloyd's Asia Scheme, to facilitate Lloyd's operations in Singapore. To-date, the Lloyd's Asia platform has grown significantly in terms of syndicate participation, gross premiums and staff strength. There are currently 20 syndicates represented on the platform, employing about 200 staff. The relationship between Lloyd’s and Singapore is a very constructive and enduring one, and I am pleased that Lloyd’s has built up a strong presence in Singapore from which to reach out to the rest of Asia.
14 I wish Lloyd’s of London a very happy 10th anniversary, and look forward to Lloyd’s further success in building up the presence of Lloyd's Asia here. I wish you a fruitful Seminar. Thank you.