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Speech by Mr Heng Sweet Keat, Minister for Finance, at the 10th International Conference on South Asia

29 Oct 2015

Ambassador Gopinath Pillai, Chairman, Institute of South Asian Studies, National University of Singapore

Professor Tan Tai Yong, Director, Institute of South Asian Studies


Distinguished Guests

Ladies and Gentlemen

1. Thank you for inviting me to this conference. The remarkable aspect of this conference is that we have friends joining us from India, Pakistan, Bangladesh, Sri Lanka, France, Japan, Korea, Russia, South Africa, Poland, Brunei, Luxembourg and the US. A very warm welcome to our delegates that have come from so many places.

ISAS’s Achievements

2. I had the pleasure of also keynoting this same conference in 2011. It’s a pleasure to see ISAS growing from strength to strength in the last few years. I think this conference has doubled in size compared to when I was last here 4 years ago.

3. Of course, it is not just the numbers that cheer me. More of us here today mean more relationships mutual trust and respect built up over the years, more insights and experience shared between friends and well-wishers, more good ideas for bringing all of us forward together. True friendship and shared wisdom – these are precious things. I am glad to see ISAS living up to this role, and thank all of you here for being a part of this worthy endeavour.

4. I also wish to congratulate ISAS on the book you published this year to commemorate 50 years of diplomatic ties between Singapore and India, with forewords by the two Prime Ministers of Singapore and India. I am confident that ISAS will continue nurturing strong scholarship, building constructive engagement, and establishing itself as the default platform for inter-regional dialogue.

The Singapore-India Friendship

5. As you know, we celebrated SG50, Singapore’s golden jubilee this year. It has been a meaningful year, of celebrating our last 50 years, and looking forward to our next 50 years. If I may seek your indulgence, while I say a few words on something else that is 50 years old, which is our friendship with India. Singapore and India have an enduring friendship, rooted in centuries of contact, and strong people-to-people ties at all levels. India was the first non-European Commonwealth country to recognise Singapore as an independent state. In fact, India’s own successful fight for independence, led by Nehru, inspired our founding fathers in our own struggle for independence from the British. Our relations have steadily deepened over the last 50 years. Our ties are multi-faceted and deep – on economics and trade, defence relations, legal, and cultural exchanges.

6. In recent years, Singapore has had the privilege of contributing to India’s development agenda, in certain areas where we have developed niche capabilities. For instance, we had the chance to help in the masterplanning of Amaravati, the new capital city of Andhra Pradesh. Singapore also shared our experience in water treatment, with Hyflux undertaking water projects in Dahez SEZ on the Delhi-Mumbai Industrial Corridor, and Surat. We also supported the revival of the iconic Nalanda University.

7. Indeed, we will have the pleasure of welcoming Prime Minister Modi in Singapore next month, on an official visit. As part of his visit, we will elevate our relationship. With this, we can look forward to an even greater sharing of ideas, friendship, investment and trade between Singapore and India. Just as I am confident about Singapore’s future, I am also confident in the potential ahead for relations between Singapore and India too.

Deepening Economic Ties

8. To our friends visiting from South Asia, you may not know this. I used to work in the Ministry of Trade and Industry. I spoke with many of my counterparts around the world, including many in South Asia, on ways that we could grow together. I remember many fruitful discussions with counterparts in India that led ultimately to the Comprehensive Economic Cooperation Agreement (CECA) between India and Singapore, which took effect in August 2005. We hoped that CECA would widen the road for Singapore and India to engage, deepen linkages between South East Asia and India, and catalyse a bigger trade liberalisation movement.

9. And indeed, CECA has brought our countries closer together and grown our links and trade. When we were still negotiating CECA, say, in 2003, total trade between India and Singapore was about $5.9b. Last year, it was $24.6b. So this is a four-fold increase in 10, 12 years which is very significant. The CECA also created opportunities for Singaporean companies in India. For example, the easing of investment restrictions and easing of FDI caps enabled Singaporean companies to enter into the Indian market or raise their equity holdings, such as SingTel’s investment in Bharti Telecom. I am also glad that the CECA was a pathfinder for other regional trade networks, serving as a template for some of India’s other FTAs, such as with Malaysia, and a catalyst for other FTAs, such as the ASEAN-India Free Trade Agreement (AIFTA), with the section on services and investment coming into effect in July this year.

10. We look forward to India – and indeed all our friends in South Asia – continuing to grow. I wish you success on the Regional Comprehensive Economic Partnership (RCEP) as you seek to grow economic ties and strengthen the ties between countries.

11. Other than India, other South Asian countries are also becoming increasingly integrated within the region, as well as with the rest of the global architecture. Momentum for economic cooperation has been building within South Asia. India and Pakistan have revitalised ministerial-level negotiations on expanded trade. India and Bangladesh have also enhanced bilateral ties, including in power trade. This bodes well for South Asia, which is poised to be an engine of global growth.

Key Economic Principles for Sustainable Economic Development

12. However, the key is not just how much countries grow, but how countries grow. This determines whether growth and development can be meaningfully sustained in 10, 20, and even 50 years. While 50 years seems like a short time in the lifetime of great civilisational powers like India, sustaining good growth and development for several decades is not a simple matter. This is especially true in the current age of globalisation and transformation, where everyone is interdependent, and the economic and technology revolution cycles have become compressed.

13. While the world would have changed in unimaginable ways in 50 years’ time, there are some important economic principles for development which will likely hold, not just for emerging economies but for developed ones as well. Let me take a few me

Principle 1: Market-oriented and pro-trade policies

14. First, market-oriented and pro-trade policies unpinned by strong macro-economic fundamentals.

15. Why trade? I believe that trade allows for specialisation, and the insight of Adam Smith about the division of labour holds even truer today than in the time where he wrote the Wealth of Nations. I visited a few major high tech companies involved in very technology intensive work recently. And I was struck by how they explained that at the heart of what they do was their ability to specialise, and to go deep into subjects, and at the same time integrate all these different strands of knowledge in new and meaningful ways to create new innovative products. If it is true for a small team of people working on a particular area, then it probably holds true for countries big and small, as we think about the global, and national division of labour.

16. And why market oriented policies? I believe that the market not only provides price signals for us to allocate resources efficiently, but it also allows for the creative energies of people to be harnessed in the most optimal way, because increasingly, growth will come from good ideas and how we execute those ideas. By freeing up the creative energies of people, we are more likely to have new breakthroughs and new products which can meet society’s needs.

17. Why macro-economic fundamentals? If you look at countries that have massive economic problems, whether in the fiscal or trade area, or those that do massive currency changes, it is because short term policies that drive growth ultimately come back to haunt us, through very high inflation, or volatility. A stable backdrop allows for economic agents to make good decisions.

18. So, strong macro-economic fundamentals, reliance on markets, and an exchange of goods and services not only at a national level, but also at a global level are important to sustain growth. Prime Minister Modi’s efforts to make India the manufacturing hub of the world are a good step in that direction. The world has noted India’s enhanced focus in infrastructure investment, with increased investment in infrastructure, and the setting up of the Rs 20,000 crore ($4b SGD) National Investment and Infrastructure Fund (NIIF). Also, significant efforts are being made to simplify regulations and introduce tax reform, such as through a comprehensive bankruptcy code, and efforts to implement a national GST.

19. We recognise that trade liberalisation are economic reforms are complex, and require political will and forging of consensus. India’s own experience over the last two decades, with the Look East policy it pursued from the early 90s and past policies of reform and liberalisation, show that India can do it, for the benefit of its people. We look forward to India succeeding and these initiatives bearing fruit, for it will be a boon for the region and for Singapore as well.

20. Let me add that such efforts in restructuring our economy can never stop. Preparing the economy and our people to be ready for the future is a never-ending effort, and it is easier to be ready for the future than to catch up with the present. And that is why Prime Minister Lee has set up the Future Economy Committee where we ponder about the future of jobs, companies, resources, technology, and markets. Real sustainable growth can only come from the hard and continual work of restructuring to keep up with increasingly dynamic markets.

Principle 2: Equitable distribution of wealth

21. Second, equitable distribution of wealth is key for sustainable economic development. There are two dimensions in this – equity between different groups in society, and equity across generations.

22. In 2013, there was a debate between two major figures in economic thought, Professor Jagdish Bhagwati and Professor Amartya Sen, on India’s governance priorities. Sen believes that India should invest more in social infrastructure, such as health and education, to boost the productivity of its people and thereby raise growth. Bhagwati argued that only a focus on growth can yield enough resources for the state to redistribute and mitigate the effects of the initial inequality.

23. My own view is that these approaches are not only not mutually exclusive, but actually are mutually reinforcing. When you have an equitable distribution, there will be more support for growth policy. But to have the ability to redistribute wealth, you also need to generate resources, which require growth. This is why growth needs equity, and equity needs growth. Governance priorities must strike the right balance, based on a consensus amongst the population.

24. Intergenerational equity is also important. It underpins the achievement of equity between different groups in society. Policies must be prudent and not impose undue burdens on future generations. This is sometimes not discussed enough as the effects take decades to unfold. Part of the problem that we see, in the form of budget deficits and high government debts in certain Eurozone countries, are testament to that.

Principle 3: Development of resources which will always be of value

25. A third important economic principle is the need to focus on the development of those resources that will always be of value. I previously spoke about how primary commodities was previously the main item of trade For example, the Dutch and English fought fiercely over an island in Indonesia today, Pulau Ai, because it grew the most valuable spice in the world at that time, which was nutmeg. Nutmeg was sold in Europe, for huge profits which today’s hedge funds would not dream of. The Dutch won, and got this island, and the British lost, and got this swampy place, called Manhattan. And today, I think, few people know about this island, which grew nutmeg, but Manhattan is Manhattan. So what is valuable today may not be valuable tomorrow.

26. I believe one resource that will always be valuable is land, which today’s conference is discussing. Because land has a certain permanent value, it must be managed carefully so as to support equity between groups, and between generations. For instance, while private landowners should secure land rights, this must be balanced carefully with the need to develop land to benefit the general public.

27. For a small place like Singapore, we are very conscious about how we use land, and how we create public space. One of the things we are doing a lot of is to develop a lot more public parks, park connectors, and so on, because those are important ways to raise the standard of living of the people. When Mr Lee Kuan Yew had the vision of a garden city, he thought the access to beautiful plants, trees and space for children to play should not be limited to private homes, but given to every resident in Singapore. Hence, we embarked on a huge effort to plant trees and shrubs all around Singapore. This was Mr Lee’s vision about land, public space, and common space; how we can use common space to create a sense of ownership in our society.

28. A lot of land was also set aside for public housing, so that every family can own their home, and in that way, feel that land which is scarce in Singapore can be used equitably such that everyone has a share in this country.

29. Another resource that will always be valuable is people. Indeed, I would say people are the most valuable resource of all, much more so than land. Investment in people must be prioritised. They must have the opportunities to always learn through life, so that they have the right skills to be able to create and seize opportunities that come by. People must also have the confidence, and the will to push boundaries, in pursuit of a better life for themselves, as well as for others.

30. And ultimately, people are the purpose of economic development. What gives economic development meaning is the lifting of millions out of poverty, with improvements to their health, safety, and quality of life. And ultimately, to give people opportunities to achieve their potential, through access to education and good jobs.


31. There is no one-size-fits-all approach to implementation of these three principles. There are complex trade-offs to be made in any society. If you look at some important analyses of economic policy, one very important conclusion is that while the principles can be seen in many successful institutions, the way in which they were implemented, the way in which institutions are devised to meet those needs, and the way in which the governance structure is done, all differ significantly across societies which have made progress. Hence there isn’t one set of institutions that meets the needs of every society, because every society is different in terms of its culture, history, and reality of politics.

32. Different societies at different stages of development must find their own balance. This can be done as long as there is good governance, and the heart of good governance is the trust between people and the Government, as well the trust between people. This engenders a willingness of all parts of the society to work together, and each to do their part for the greater good.

33. Nevertheless, it is helpful to have sharing of knowledge on the challenges that different countries face, and learn from others’ experiences. Platforms such as this, organised by ISAS, are very useful in this regard. There is potential for rich learning, because the region is so diverse where we are all at different stages of development and facing different challenges.

34. I wish you a fruitful and enjoyable conference. Thank you.