Ladies and Gentlemen
First let me thank Finance Minister Mathias Cormann for this opportunity to address you. For those of you who haven’t taken the flight, from Singapore to Perth is just 5 hours and 15 minutes. If you take it at midnight as I did, it’s so short you won’t get to sleep. But it also illustrates how close we are. I just want to make a few points today which I hope will be useful for this audience.
First, the Asia-Pacific, or the Indo-Pacific, is growing well and is stable. The IMF puts the expected GDP growth in the Asia-Pacific at 5.5%. This compares against the global average of only 3.5%. There are three key engines for this growth potential. First, China still registers impressive growth, with a forecast of 6.8% for 2017. This is despite the fact that the Chinese labour force has already peaked and is beginning to shrink, and wages in China are rising. Nevertheless, 6.8% growth on that large base is still a great achievement. India, under Prime Minister Modi – rationalising taxes, demonetising large value currencies, streamlining systems, introducing GST, and bringing in investments – all these has led to GDP growth of over 7% in the past two years. One key difference between China and India is that India has not yet harvested its demographic dividend, and has many young people. If you shift your focus to ASEAN, Southeast Asia lies at the interface between China, India and Australia. Things look good for us. The compound annual growth rate has been 6% for ASEAN over the last decade. This compares with 4% for the global economy. Our projected compound annual growth rate for the next five years is 5.2%, which is still a credible number. Compared to Northeast Asia, the big difference is that 60% of ASEAN’s population is below the age of 35. While Northeast Asia is ageing in an unprecedented rate, ASEAN will remain young, and there is a demographic dividend to be harvested. So our economic fundamentals are good and the trajectory looks positive.
But there are challenges. On the economic front, we hear rhetoric against free trade, and this is something that must strike fear to a German, Australian and Singaporean audience, because so much of our current and future success is dependent upon a global consensus in favour of free trade. Another strategic issue is how the US and China will get along. This is the most important bilateral relationship in the world. The question is whether they will find a proper modus vivendi, which will provide for a cooperative, interdependent relationship, and meaningful engagement between them, and between them and our region. The implicit question is whether the two powers believe that they can continue to benefit from an inclusive, multilateral, rules-based world order.
Next, how are we going to deal with these challenges? First, we need to continue to advocate for free trade. Trade and open markets have been the bedrock for our growth and prosperity, as well as peace for this part of the world. Our region is primed to tap the different engines of growth, and our regional players are connecting up under various emerging economic architectures. Within ASEAN, we have the ASEAN Economic Community, which aims to create a single market, a single investment zone, a single production zone amongst 10 Southeast Asian countries by 2030. With our regional partners – China, India, Korea, Japan, New Zealand and Australia – ASEAN is pursuing the Regional Comprehensive Economic Partnership (RCEP). The RCEP consists of ASEAN and the six countries, which ASEAN already has existing free trade agreements with. Singapore has always been the foremost advocate for the inclusion of Australia to all these regional arrangements. The Trans-Pacific Partnership (TPP) is still in play. The United States has withdrawn, but we have 11 remaining members, and we are trying our best to find a way forward. The leaders of the TPP-11 will be meeting in Vietnam shortly.
In the meantime, China remains a major driving force. It is the largest trading partner for many countries in the region, including both Australia and Singapore. It is actively pushing its Belt and Road Initiative in order to interconnect the wider Asian region closer together. Its Asian Infrastructure Investment Bank can help plug the financing gap because we all know that there is a huge appetite for infrastructure and connectivity projects throughout Asia. We should welcome these projects so long as they are commercially viable and contribute to regional development. Not to be outdone, India is also doubling down on its “Act East” policy. India used to only “Look East”, but Prime Minister Modi has said that they have to “Act East”. This also includes actions by Japan, which has recently announced a “Free and Open Indo Pacific Strategy”. The common point in all these economic architectures is that Australia and Singapore remain a key stakeholder in all of them. We prefer not to be forced to make invidious choices. If we can continue to play an active role in all these emerging architectures, the prospects for Australia and Singapore remain bright. That is why we will continue to pursue integration in search of common prosperity, in order to bring tangible benefits and jobs to our people.
The second is the elephant that is not in the room, the US. As we connect and deepen our trade links with China, India, Japan and other regional powers, we need to continue to encourage the US to remain engaged and be a key stakeholder in our regional economic architecture. In a sense, this is a game for the US to lose. For the past 70 years, the US has underwritten a multilateral, rules-based world order, characterised by free trade and economic integration. They underwrote that, and we benefitted from it. But the US didn’t underwrite it out of charity. They underwrote this world order because the US, as the largest single economic power, had the most to gain from it. However as we move into a multi-polar world, with emerging economic superpowers, it is actually a legitimate political question within the US to ask what price the US should pay in order to maintain this multilateral world order. It is Australia and Singapore’s job to continue to try to persuade the US that it is still a worthwhile investment; that they have a head start, tremendous reservoirs of goodwill, and it is in their own interest to continue to remain plugged into and integrated with our region. We should not fall into the trap of viewing Sino-US relations as a zero-sum game. There is a big difference between the US and China’s relationship, from the previous relationship between the US and the USSR during the Cold War. Never before have a superpower and an emerging superpower been so closely intertwined, so dependent on trade and investments with each other. We hope that this mutual interdependence will help bring about a healthy, and cooperative relationship between the US and China. If they can manage that successfully, it will be positive for all of us.
Third, in the immediate aftermath of the Second World War, we gained from the peace dividend and from the commoditisation of the fruits of the last Industrial Revolution. Education was freely available, which opened doors for an emerging middle class. Elections all over the globe are determined by the outlook of the middle class. Since the late-70s and 80s, and certainly the 90s, there has been middle class angst about wages and jobs. The proximate threat today to middle class jobs is the new technological revolution. That has led to a situation where many people in previously secure jobs are beginning to feel uncertain. The political problem is that this angst has been misdirected against free trade, immigration and economic integration. What is actually needed is a new G.I. Bill – a new, consolidated, comprehensive effort to train, educate, and upskill our work forces. We are now in the day and age where all of us will need to have two or three jobs in our lives, and those skills will need to be elevated and upgraded in order for us to take advantage of new technologies. That is why in Singapore, we are focused on restructuring our economy, transforming our different industries, focusing on new jobs, skills, opportunities and markets.
As far as Australia and Singapore are concerned, we are completely strategically aligned and economically complementary. We are both cosmopolitan societies, outward oriented, and believe in free trade. We advocate for open, rules-based, multilateral world order, where countries big and small can prosper on a fair playing field. We share similar views on security and stability in the Indo-Pacific, whether it relates to issues of maritime security, cyber security, or terrorism. We saw it in our common interest to sign the Comprehensive Strategic Partnership (CSP), which transforms our economic, defence and security, science and innovation, and people-to-people agenda. We are heartened by the bipartisan support in Australia towards this important relationship. I said bipartisan because over the last 20 to 30 years, it has been quite hard to differentiate Australia’s foreign policy towards Singapore, regardless which party is in power. We are happy that consensus for a good relationship with Singapore has prevailed.
All in all, our prospects are bright. We have much to celebrate, and much to look forward to. We have some challenges that we need to overcome. But if other countries share similar perspectives with Australia, Singapore and Germany, the world would be a much better place. Thank you all.
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