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Going Global Pays Off

Mint Kang traces the roots of singapore’s push towards global trade and its evolution over the past three decades.

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Going Global Pays Off

  1. 1. COVER sTORY – TRADE FOCUs sPECIAL Going Glob Pays Off Mint Kang traces the roots of singapore’s push towards global trade and its evolution over the past three decades. T he 1970s were years of increased international trade and, for Singapore, a decade of economic growth. The entrepot trade having been Singapore’s lifeblood for the The Department of Trade and its successor, the Ministry of Trade and Industry (MTI), provided both. Restrictions on foreign companies were minimal; private enterprise was given a free hand. past two centuries, it was not surprising A secure financial infrastructure was set in that a department should have existed place, and backed by political stability, it even then to handle all matters successfully attracted companies from pertaining to trade. around the globe to invest in Singapore. Located in the Ministry of Finance (MOF), Back to entrepot the Department of Trade was responsible By the 1980s, however, the world trade primarily for processing export and import situation had become one of increasing documentation. During this period, the protectionism. Given the degree to which economic structure focused primarily on Singapore’s prosperity depended on export and investment, and the external markets, MTI responded by department’s priority was finding buyers establishing a statutory board solely for for Singapore products – mainly the purpose of promoting exports. electronics items at the time. The Trade Development Board (TDB) was Throughout the decade and right up to accordingly inaugurated in 1983. More the formation of the Ministry of Trade flexible than a government department and Industry from MOF’s Development and better able to represent the interests Division in 1979, trade activities of the private business community, the centred around export and foreign TDB’s priority – compared to that of the investments. Attracting foreign Trade Department – lay with promoting investors called for economic openness imports for the re-export and and a high level of support. transhipment trade. 8
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  3. 3. (Gatt), expanded the TDB’s role still further. The TDB accordingly implemented a wide The monitoring of trade processes was range of support schemes during the brought under the department’s purview, as early 90s, aimed at helping local was the task of ensuring that international companies that wished to internationalise. rules and procedures were complied with. They included assistance in franchising, obtaining international certification and At the same time, the increased volume of licensing. Simultaneously, the TDB began trade brought in by participation in Gatt to act as secretariat for a number of sent the importance of swift and accurate business groups aimed at enhancing documentation rocketing. The immediate Singapore’s competitive advantage in result of this was a groundbreaking various countries. 1994 marked the development: TradeNet, a nationwide passing of the $3 billion mark in trade, a system for automating the processing of net 50 per cent increase in total trade in trade documentation. just four years. The trend continued: despite a 7.5 per cent decline brought Introduced in 1989, TradeNet was the first about by the 1997-98 economic crisis, such nationwide system in the world, and trade rebounded spectacularly in 000 to was wildly successful. Not only did it put pass the $400 billion mark. Singapore on the map in terms of trade and technology, but it also stepped up In the same year, the TDB launched the trade efficiency nearly four-fold. Within the Approved Cyber Trader Scheme to year, half of all trade documents were encourage the setting up of regional processed through TradeNet, saving billions e-commerce trading centres in Singapore, of dollars in overheads and man-hours. and the online version of the Trade Finance System. These systems had been preceded As if celebrating this achievement, total by GlobaLink and Statlink in 1995 and 1996 trade in the following year exceeded the respectively, both aimed at bringing the $00 billion mark. The figure heralded a TDB’s services up to date with the increasing The then-minister for trade and industry, busy decade for the TDB. Trade prevalence of Internet technology. Dr Tony Tan, said: “The success of liberalisation had extended the establishments like Jetro, Kotra (in Japan department’s portfolio significantly: Statlink in particular was a first in the and Korea) and similar bodies in Taiwan throughout the 1990s, Singapore’s history of global trade: it allowed trade and Hong Kong lent credence to the presence in regional and international belief that such a statutory board would bodies ranging from Asean to the World serve a useful purpose in Singapore.” Trade Organization began to grow, and the department was responsible for The TDB’s early activities were fairly representing Singapore’s trade and humble: the board started out processing economic interests within these trade documents and monitoring trade organisations. levels. Its promotion efforts were initially limited to the publication of trade It was also during this period that the directories and newsletters listing economic focus gradually shifted towards exportable goods and services, and facilitating the attempts of domestic pointing out trade opportunities to companies to move outwards. Singapore’s overseas companies. international presence having been firmly established in the past decade, there was Over the next decade, however, as now room to more closely examine the awareness of Singapore as a trade hub role of Singapore-based companies in grew, the scope of the TDB’s efforts economic growth. expanded commensurately. The department went on to establish overseas offices from The then-prime minister Goh Chok Tong London to Sydney and Mumbai to said in his New Year message: “For the Washington: a network which has, today, next ten years - we must participate and increased to over 30 offices worldwide. ride on the growth in the region. If we do not trade with, invest or work in these This heightened international presence, fast-growing countries, we will miss the combined with Singapore’s accession to the boost they can give us.” General Agreement of Tariffs and Trade 10
  4. 4. statistics to be loaded on to the Internet companies which aim to expand their concurrently with their release to the operations abroad. media, a service which no other country had yet made available. Singapore brands that have become internationally renowned with the From trade to enterprise assistance of IE Singapore include such In 00, the changing nature of well-known companies as BreadTalk, Singapore’s internationalisation strategy Banyan Tree, ST Electronics and many more and the TDB’s role in that plan were – names which are not only well-known, reflected in the restructuring of the TDB as but linked with Singapore in the eyes of International Enterprise (IE) Singapore. their foreign partners and investors. The department’s mission was reworked The newly renamed IE Singapore went on to focus on helping Singapore-based to establish the Singapore Chamber of companies to grow and internationalise – Commerce and Industry in China, and a natural next step for an organisation followed this by launching a series of that previously specialised in the programmes and forums outlining new facilitation of trade. strategies for Singapore-based companies to internationalise. Chong Lit Cheong, IE Singapore’s CEO, said: “This was in response to growing These included the International Partners recognition of the importance of Programme (iPartners), which encourages expanding beyond our shores for companies to work in groups to compete Singapore companies and our economy as internationally. As of November 006, IE see more high-growth companies a whole to enjoy continued and Singapore has helped form 5 alliances emerging in Singapore. Importantly, we sustainable growth.” involving collaborations among 19 would like them to use Singapore as their companies. home base and springboard, to spread In April 00, IE Singapore was their wings into the region and beyond.” inaugurated under the auspices of the Moving forward Ministry of Trade and Industry. Its mission In a speech at the opening ceremony of With a broad-based spectrum of since then has been to provide support last year’s IE Forum, Minister for Trade and programmes aimed at upgrading the and services to Singapore-based Industry Lim Hng Kiang said: “We hope to business capabilities of local enterprises, and increasing their access to financing, IE Singapore is doing all it can to fulfil that vision. In Mr Chong’s words: “IE Singapore is committed to help Singapore-based enterprises grow and internationalise successfully. We will also be focusing on growing our trade flows with new and existing programmes to become the top international trade hub for Singapore- based enterprises. “We will seek to deepen our engagement with India and the Middle East while cultivating China and Asean as our key markets. We will also seek out new opportunities in emerging markets such as Russia and Latin America. “With IE Singapore’s extensive network of overseas centres, market insights, and strong connections, we look forward to bringing more Singapore-based companies abroad and helping them realise their global aspirations.” 11
  5. 5. COVER sTORY – ECONOMY OVER THE YEARs singapore’s Economy: Then And Now Vikram Khanna looks at three key trends in the transformation of singapore’s economy in the last 30 years. The changed face of manufacturing worth of goods, or barely 0.7 per cent of and services Singapore’s total exports. By 005, non-oil The Singapore economy has changed domestic exports to China had rocketed significantly since 1976. In terms of size, more than 100 fold to $15.0 billion and it has grown by more than 10 times to a China accounted for 9.7 per cent of GDP of $194.4 billion at the end of last Singapore’s total exports. China’s share of year. While manufacturing and services Singapore’s exports has thus increased by have been the mainstays of the more than 13 times over that period. economy, the composition of both has changed markedly. This reflects, first, the spectacular growth and internationalisation of China’s For instance, in 1979, machinery and 1976, when it was dominated by economy over that period – China started appliances accounted for 8.7 per cent of wholesale and retail trading. Today, to open its economy in 1978 – and manufacturing value added, and the financial and business services, taken second, China’s emergence as the centre electronics sector was not large enough together, account for around 36 per cent of the global supply chain, especially for to warrant being classified as a separate of the service sector. electronic goods, in which Singapore is category. Petroleum products also ranked also a key player. high in 1979, accounting for 18 per cent Singapore has emerged as a major of value added. However, by 005, the financial centre in the region providing India was a slightly larger market for share of machinery and equipment in services that include foreign exchange, Singapore than China in 1977, but it, too, total manufacturing value added had financial futures and derivatives trading, was small, absorbing less than $350 fallen to 7.3 per cent. offshore banking, asset management, million (or 1.7 per cent) of Singapore’s mergers and acquisitions and private exports. By 004, Singapore’s non-oil Electronics alone accounted for 36 per banking - which were either nascent or domestic exports to India had leapt to cent of value added. The second largest non-existent in the 1970s. $5.1 billion and India’s share of sector was pharmaceuticals (16.4 per Singapore’s total exports had doubled. In cent), which includes the biomedical The Stock Exchange of Singapore, recent years, India has emerged as and life sciences segment – new thrust inaugurated in 1973 (now known as the Singapore’s fastest growing trade partner. area – followed by chemicals (8 per Singapore Exchange), currently has 693 cent). Precision engineering and marine listings, including more than 00 and offshore engineering have also companies from 0 countries. become key clusters in the new manufacturing landscape. New patterns of trade: China and India loom large These shifts have partly reflected a Between 1977 and 005, Singapore’s deliberate strategy to restructure the non-oil domestic exports rose fold to economy towards higher-value added $154.6 billion. While the United States, activities. Now, Singapore is harnessing the European Union, Malaysia and Japan RD to move further up the value chain have remained major markets throughout in areas including electronics, biomedical that period, the marked change has sciences and chemicals. occurred in respect of China and to a lesser extent, India. The services sector, which accounts for 63 per cent of Singapore’s GDP, has In 1977, China was a tiny market for become much more diversified since Singapore, absorbing only $145 million 1
  6. 6. Going regional and global: Although these projects hit some early About International Enterprise an accelerating trend speed-bumps, they were eventually Singapore Given its relatively small domestic market, successful. In recent years, Singaporean Singapore’s economic strategy on trade companies have been investing aggressively International Enterprise (IE) Singapore was always outward-oriented. When it overseas to be part of a new international is an agency under the Ministry of came to outward investment, many supply chain. They have also sought out Trade and Industry spearheading the companies have been investing regionally new markets, in relatively unfamiliar development of Singapore’s external since the 1970s. However, Singapore’s countries such as Russia, Kazakhstan and economic wing. regionalisation drive accelerated after Libya, plus the Middle East. 1993, when then Senior Minister Lee Our mission is to promote the overseas Kuan Yew called for ‘a second wing’ for Today, Singapore companies such as growth of Singapore-based enterprises the Singapore economy. Keppel, Sembawang, Ascendas, Capital and international trade. With a global Land, NOL and Asia Pacific Breweries are network in over 30 locations and our Overseas investment by Singapore well-known overseas. Even smaller “3C” framework of assistance – companies grew at an average of 9 per companies, such as BreadTalk, OSIM and Connections, Competency, Capital, we cent from 1993 to 1997, the year of the Want Want have established their names offer services to help enterprises Asian crisis. Between 1998 and the end of outside Singapore. export, develop business capabilities, 004, the stock of Singapore’s direct find overseas partners and enter new investment abroad more than doubled to The Singapore government now has a markets. At the same time, we work $17. billion, close to 100 per cent of dedicated agency – International to position Singapore as a base for Singapore’s 004 gross national income. Enterprise Singapore – which helps foreign businesses to expand into the companies internationalise. It has also region in partnership with Singapore- Most of Singapore’s FDI was in the area of signed 11 free trade agreements with based companies. financial services, manufacturing and major trading partners, including the US, commerce. The biggest recipient countries the European Free Trade Association, Mission (not counting locations in the Caribbean Japan, Australia, India and Korea. These To promote overseas growth of and Latin America, which were used as provide a range of benefits to boost Singapore-based enterprises and channels for investments by holding Singapore companies’ overseas international trade companies) were China, Malaysia, investments, including preferential access Indonesia, Hongkong, the European to certain sectors, faster market entry and Vision Union and the United States. Intellectual Property (IP) protection. A thriving business hub with globally competitive enterprises and leading Asian destinations accounted for $84 By 01, Singapore’s Ministry of Trade international traders billion, or almost one half, of Singapore’s and Industry expects Singapore’s direct stock of direct investments at end-004. In investments abroad to cross $300 Please visit Singapore’s regionalisation drive, some of billion, and earn annual returns of for more information. the early flagship projects started in the around 8 per cent. 1990s were the industrial parks in Suzhou and Wuxi in China and the Information Technology Park in Bangalore, India. 13
  7. 7. COVER sTORY – COMPANY PROFILE, CWT From Local To Global Player We look at one company’s growth into global expansion over the years. CWT was one of the earliest container year, with net profit jumping 175 per cent Geographically, the company has depot operators and trucking companies to a record $9.5 million. Never one to be expanded its presence to China, Sri in Singapore, with the initial shareholders easily contented, Mr Loi Kai Meng, Lanka, Pakistan, Egypt, Thailand, India, being notable names: PSA, DBS Bank, Chairman of CWT, is still actively seeking Korea, Australia, the Middle East and Intraco and NOL. Set up in 1970, the operational capabilities in the region. Malaysia, with astounding results. company was formed to prepare for the advent of containerisation in Singapore. “We are capitalising on our strong “The freight forwarding business is an presence in Singapore, to grow our extremely scalable sector. Every quarter, The primary focus of CWT then was to business internationally,” said Mr Loi. CWT opens a new office. We plan to build up Singapore’s container trucking “This will continue to be the key focus of keep this up by consistently being on the capabilities, establish container depot our group, as the company continues to lookout for suitable areas for expansion,” operations and prepare for land-based accelerate its growth in Asia as well as said Mr Loi, a veteran in the logistic container operations that would be around the region.” industry with 30 years of experience. needed with the onset of container terminal operations by PSA. As one of the major logistics players in With an annual turnover of more than Asia offering integrated logistics $00 million and staff strength of over CWT was subsequently listed in 1993 on solutions, CWT services some of the 1700, the company currently manages the Singapore Exchange (SGX). The world’s best known brands in the more than 1.8 million square feet of company has been performing well chemical, fast-moving consumer goods, warehouse space, as well as a sizeable following an aggressive expansion route healthcare, electronics, automotive and transport fleet of 65 prime movers, 6 embarked on by the company early this industrial sectors. Revenue growth last delivery trucks and chassis in year. Group earnings more than doubled year came mainly from its non-vessel Singapore. for FY005, compared with the previous common carrier (NVOCC) or freight forwarding business. The group’s largest warehouse is CWT Distripark, which is also the flagship This can be attributed to its expanding distribution complex of the group. Built subsidiary, CWT Globelink. In 1996, next to the group’s headquarters in the CWT acquired a 51 per cent equity stake Jurong Industrial Park, CWT Distripark in a local freight forwarding group, was completed in December 1989 and is Globelink Forwarders Pte Ltd, and its one of the largest and most modern subsidiaries. The acquired company was distribution complexes in Singapore. named CWT Globelink Pte Ltd. In 00, CWT successfully acquired the remaining Around the region, the company is the 34 per cent shares in CWT Globelink, first and only firm to have won the making it a wholly owned subsidiary of Intelligent0 Award for four consecutive CWT, thus strengthening the group’s years, for its e-solutions that provides global distribution logistics business. interactivity, giving customers value-added Today, CWT Globelink, the freight- total logistics management and visibility. forwarding subsidiary of CWT, provides The award is the most coveted IT award in the global reach to the group’s logistics the Asia-Pacific, presented annually to 0 solutions, with around 50 offices companies that make IT work for them by covering some 150 main ports and 1,800 combining the right business focus, the destinations worldwide. right people, the best business value and the best execution strategy. The logistics capability of CWT was further enhanced when local transport These series of articles first appeared and packaging group, CP Holdings in The Business Times, Wednesday, Limited, became a major shareholder of October 18, 2006. Reprinted with the company. Currently, CP holds a total permission. stake of about 75 per cent in CWT. 14