Edited Transcript of Remarks by Minister for Foreign Affairs Dr Vivian Balakrishnan at the Inaugural Session of 'India-Singapore: The Next Phase', A Business and Innovation Summit Organised by the High Commission of India, 9 September 2019

Minister for External Affairs of India S Jaishankar

Distinguished Guests

Ladies and Gentlemen

Let me start by posing this question to all of you. If you go back two thousand years, where were the major economies of the world? The answer if you go back two thousand years, there was Rome, a significant and major empire. And I ask you another question. Was there trade between Rome and India? The answer is, yes. And then if you fast forward a thousand years, and I pose this question to you: what was the share of global GDP that India and China constitute a thousand years ago? The answer is that these two ancient civilizations constituted about half of the global GDP.

Moving forward another five centuries to the late 15^th century, the Age of Discovery was occurring in Europe – the Renaissance, the re-discovery of science, and in particular the incipient beginnings of a technological revolution meant that per capita GDP in Europe was at least double of that in India and in China. And the Europeans back then already knew about the wealth of India. And that’s why in 1492, when Christopher Columbus landed in America, what he was really in search of was India and its wealth. And from 1497 to 1499, Vasco da Gama, the Portuguese explorer, circumnavigated the Horn of Africa, and reached India – I think Calicut, a port city in Kerala. And then began the European colonisation of India. One question which I would also leave with you is, why, and how, did this happen? And my hypothesis is that it was because the Industrial Revolution began in Europe. And they amassed enormous technological, economic and ultimately military power, and that became the fuel for colonisation.  And that was the last few centuries as we know it.

The reason why I have taken this extended jaunt through history is because I wanted to leave a few points on the table. One, India has always been an ancient and wealthy component of global GDP. Second, trade has always been a part of that. Third, do not underestimate the importance of industrial revolutions and disruptions that has on distribution of power in the world and its long term impact on us.

Fast forward to today, I believe we are on the cusp of another Industrial Revolution – whether you call it Industry 4.0, or the digital revolution, whatever you call it. When you are on the cusp of another revolution, you must anticipate disruption on a similar scale as that had occurred five hundred, a thousand, or two thousand years ago. Therefore, that sets the context for how we view the world, how we assess the trends that are unfolding, and how to maximise the opportunities. I do not have time to explore all the implications, but I wanted to leave these thoughts on the table for you to consider.

If I were now to zoom down to the dynamics of the relationship between India and Singapore, let me share a few thoughts. The history of Singapore as a trading port can never be separated from the importance of trade between India and China. It is no accident that Singapore – which is one degree, 15 minutes north of the equator; at the tip of the ancient Eurasian landmass and the Straits of Malacca; and at the fulcrum between the Northeast monsoon and the Southwest monsoon – was always part of trade between India and China. With the advent of the Industrial Revolution and the arrival of the Europeans in the region, we ultimately became part of not just the Indo-Pacific region, but also of regions across the Pacific and the Atlantic.

What this means is that Singapore has always sought to integrate India into the regional architecture. That’s why as Minister Jaishankar mentioned, Singapore was a key advocate for the inclusion of India into the East Asia Summit. We have always believed that India belongs to this part of the world. We have always viewed India to be an essential and invaluable partner. This partnership is defined by a common strategic outlook and a shared commitment to maintain a multilateral rules-based order.

On the defence front, let me share a factoid of which many of you in this room may not be aware of. India is the only country with which Singapore has bilateral agreements across all three services – the Army, the Air Force and the Navy. As maritime nations, our navies have been exercising together annually for the past 26 years. Together with Thailand, we will be holding a trilateral naval exercise in the Andaman Sea in late September. So this has been another lesser known fact – the strength of our defence relations.

Let me move quickly to economic cooperation, and why are we are such strong believers in the economic potential of India, and the importance of India’s success to Singapore’s own prospects. Let me give you a few reasons for optimism. First, the economic growth of India that we are witnessing is ground up. Of course, the Indian government, especially since 1991, has opened up the economy. But the truth is this is ground up. Indian companies have risen, some say despite the “License Raj”, they have survived and thrived under sometimes difficult and challenging circumstances. Bilateral trade between India and Singapore currently stands at US$18.7 billion. Another interesting factoid – if I were to ask you, who is India's largest foreign investor at this point in time? The answer, which may be surprising to some of you, is that Singapore is India's largest foreign investor at US$16.2 billion. And I want to add, because I know that there are regulators in this room, that most of that money is from Singaporean and Singapore-based companies. Not round-tripping.

I give an example of what I think is a successful joint project. The TATA-Singapore Airlines joint venture, Vistara, has launched its first international flights in August, from New Delhi and Mumbai respectively to Singapore. We hope to see more of such connectivity, especially in the air. Singapore welcomed 1.4 million visitors from India in 2018 – a big number. But frankly, if you look in terms of the size of the Indian population, this is only a drop in the ocean. But, it gives you an idea of the potential.

A second reason for optimism is that a lot of the growth that we are witnessing in India is really about the digital space. Both India and Singapore have embraced the digital economy in a big way. We believe that our collaboration in this area will be a pathfinder for others in the region. For instance, RuPay can already be used in Singapore. In fact, Prime Minister Modi launched it during his last visit here. Singapore and India are working to expand this network so that we can benefit more visitors, tourists and businessmen in Singapore and India and beyond. The dream is to make cross-border digital payments real-time, seamless and at the lowest possible transaction costs. This will benefit hundreds of thousands, and even millions of workers, expatriate workers, business people and tourists, even as trade flows between our regions expand exponentially

Now this is not just about opportunities for businessmen. Think about the Indian foreign worker anywhere in the globe trying to send money back to his mother. I think that worker deserves to have the most seamless, most pain-free system with the lowest transaction cost, to send his hard-earned money back to his family. Similarly, think about the small entrepreneur, business owner, hawker, or artisan, and the benefits for him or her in being able to access a global market, and to be paid in the most cost-effective way possible. This is really about democratising economic opportunities across the spectrum for everyone. We are very glad that the Monetary Authority of Singapore and the Indian Department of Economic Affairs has a Joint Working Group on FinTech. You might be aware that Singapore hosts one of the largest FinTech Festivals in the world annually. Within that, India’s participation– the Indian booths – are always the largest in the festival. All this is reason for optimism.

The third reason for optimism is about young people. Would you believe that 30 percent of India's population today is below the age of 14? If that’s not enough, 62 percent of India's population is between 15 to 59 years old. This means that there is an incredible demographic dividend available to India over the next five decades. This is a unique pole advantage that India has, compared to any other major economy in the decades to come. A demographic dividend needs to be harvested. Whether or not this will be harvested depends upon successful reform within India to educate young people, to democratise opportunities, to reform and open up the economy, and to connect the Indian economy to the rest of the world. Assuming all this can be achieved, can you imagine the tsunami of opportunities that will come the way of Indian youths? And that leads to the rest of the world.  That is why it is important that you notice in the booths today, we have a more than proportionate representation of young people present.

One of Prime Minister Modi's brainchild was to bring together youths from tertiary institutions in India and Singapore in a 36-hour Hackathon. The second Singapore-India Hackathon will take place in Chennai in late September. Singaporean and Indian students have formed combined teams, and have already started discussions to find solutions to quality education, good health and well-being, and affordable and clean energy. Imagine the power of the innovation, passion and energy of young people solving these fundamental challenges of the future.

I have given you reasons for optimism. The next question is: what are we going to do about it? Prime Minister Modi announced the goal of India becoming a US$5 trillion economy by 2024 – five years from now. In effect, he is asking for a doubling of India’s GDP, which is a significant challenge.  India is also targeting to invest 1 trillion Indian Rupees, about US$13.9 billion, over the next five years in urban infrastructure and solutions. This is critical because we all know India is projected to rapidly urbanise over the next few years. Cities are projected to double from 42 to 68. The urban population will increase 200 million from 340 million to 590 million. Ultimately, within the next decade, about 40 percent of India's population will live in cities. This is a huge opportunity for businesses in the urban sector. We believe Singapore – a tiny city state that is welcoming and familiar to Indian businesses, tourists and visitors – is a natural partner as India urbanises. Our expertise in urban development, planning, and infrastructure finance will be salient to India. Prime Minister Modi has also listed water conservation as a priority during his recent Independence Day address on 15^th August. No one understands the sanctity and how to make every drop of water count better than Singapore. In this area too, in our own small but significant way, we believe our experience will be relevant to India.

We believe Singapore remains an ideal base and gateway for Indian companies as India expands outwards. I am glad to note that there are more than 8,000 Indian companies already in Singapore. They form the largest foreign business contingent in Singapore and pan diverse areas such as IT services, education, logistics, and manufacturing. We believe Singapore can help these Indian companies expand their supply chains and access markets in the young and growing ASEAN region. We can collaborate with Indian government agencies and Indian companies to provide digital platforms that facilitate the ease of doing business. We have the diverse population, and we have the support structures to help them develop, trial and adapt digital solutions, both in ASEAN and in India.

And I want to conclude, that historically, India is in a sense, returning to its original, historical trajectory. And so is China. This is the story of our lifetime, particularly for Singapore, at the nexus between India and China, and also having close links to the United States and Europe. If we succeed in constructing a multilateral rules-based system, with economic integration, free trade, investments in infrastructure and urbanisation, and investments in the software of the brains of our young people, then a Golden Age awaits us. This is a Golden Age which has been overdue for India and China, and Southeast Asia. On that note of optimism, I thank you for your attention, and look forward to your questions and discussions.

Thank you all very much.

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Minister Balakrishnan also spoke on the status of the Amaravati Capital City project, and India’s involvement in the Regional Comprehensive Economic Partnership (RCEP) during the question and answer segment of the inaugural session, which was moderated by Ambassador-at-large Tommy Koh. The edited transcript of Minister Balakrishnan’s responses are below.

Amaravati Capital City Project

Ambassador Koh:  One of the bilateral projects between India and Singapore, which has caught the imagination of many Singaporeans, is a project to build a new capital city in Andhra Pradesh called Amaravati.  So my question to the two Ministers is, is Amaravati sick, very sick or dead?

Minister Balakrishnan:  With your indulgence, let me give you a perspective from Singapore. In 2014, the then-government of Andhra Pradesh sought Singapore’s assistance to master plan a new capital, Amaravati. Why was there a need for new capital? Well, again the previous government had bifurcated Andhra Pradesh into two states. A consortium was formed, Ascendas-Singbridge and Sembcorp was awarded through a competitive Swiss Challenge. The opportunity to form a joint venture with the then-government of Andhra Pradesh, to master develop the capital using green and sustainable urban solutions, and in which, quite frankly, Singapore companies have significant expertise . This collaboration was complemented by a government-to-government Memorandum of Understanding between the Government of Singapore and the Government of Andhra Pradesh focussing especially on training and capacity development. And this was endorsed by the Union government.

There is a new state government in Andhra Pradesh that took power on the 30^th May. I want to state here for the record for the incoming, new Finance Minister (of Andhra Pradesh) that all governments are perfectly entitled to review their plans. If you want to review the plans for the capital city, you are perfectly entitled to do so. So the Singapore consortium companies have informed me that they will wait. They will wait for decisions to be made by the current government and they will evaluate the impact of this new review of investment regulations on investment opportunities.

I should also state here for Singaporeans that no Singapore government grants or subsidies were deployed for this project. This is a private sector, commercial decision. I will also add that when private companies from Singapore, or from anywhere else for that matter, make investment decisions, all companies have to take into account political and regulatory risks. This is part and parcel of doing business. And I would also add that it is the prerogative of the local government to adjust their plans and priorities from time to time. And it is the prerogative of investors to decide whether to stay or to leave.

What transcends such changes is the sanctity of contracts. And when certain terms and conditions are entered into - to safeguard the interests of the client as well for the solution provider, such contracts are entered in accordance with the existing laws of the land and must be honoured as such.

And I would also submit that governments need to consider the signal that they send to investors. In the case of Singapore, we have remained a highly competitive economy because we have provided, for the long-term, a stable and predictable environment for investors, both local and foreign. And this actually lowers the cost of doing business, this encourages more investments. So I would ask everyone to just give time to the new government in Andhra Pradesh to sort out their priorities, sort out their plans, and then allow the private sector to make their own decisions rationally. I think we should leave it there and not make it more complicated for the new government of Andhra Pradesh.

RCEP

Ambassador Koh:  In the contemporary world, free trade is being challenged by protectionism and multilateralism being undermined by a preference for bilateralism and unilateralism.  Given this context, it is very important for us to successfully conclude the negotiations for a Regional Comprehensive Economic Partnership Agreement, which involves 16 countries that will represent one third of the world’s GDP.  The 16 trade ministers have just completed their latest round of negotiations in Bangkok over the weekend.  Many people think the fate of the RCEP is in the hands of India.  Is India ready to join the other 15 partners to cross the finishing line this year?

Minister Balakrishnan:  Let me give you a Singapore’s perspective on this. I think Minister Jaishankar will agree that Singapore has been a reliable partner in advocating for India's integration and inclusion in our part of the world. I state that as a fact, and I think it is one which all Indians would all recognise. The second fact, I have already alluded to earlier, is that Singapore is now the largest foreign investor in India. The third fact is that Singapore is also surprisingly, right now the largest foreign investor in China. The fourth fact is that China is our largest trading partner. Fifth, the trading account with India is also expanding in a major way. We also have a significant economic relationship with the United States of America. In fact, the largest foreign investor in Singapore is the United States.

If you add up all these facts, where does this lead us to? If I were to ask you, in the next decade or two to come, isn’t it obvious that China and India are going to have a significant trading relationship. And this is something that India and China will have to sort out. I am sure in due course of time, bilateral arrangements will be made. But even if this rapprochement or modus vivendi between India and China occurs, what we are trying to offer with RCEP is a multilateral model, a pan-regional model, a centre of gravity in the Indo-Pacific. And if we can sort out fair rules, which will promote trade and economic integration between India, China and Southeast Asia, there is enormous opportunity.

I say all this, without in any way trying to trivialise or to gloss over the difficulties in negotiations, in trade in goods, trade in services, intellectual property, and so on and so forth. I am making the argument that it is worth making that effort, because this will be a game changer. The 10 countries of Southeast Asia, India, China, Japan, Korea, Australia, New Zealand, this will be the mother of trade agreements. And precise at a time when the world is facing a pushback against globalisation, against free trade, against economic integration, we believe it is all the more important for those of us who believe that this is a recipe for peace and prosperity to make the effort.

And I remain optimistic that because of the nature of the Indian economy, and the transformation which Prime Minister Modi is bringing about. In fact, India can deal with this from a position of confidence.

Let's make the effort because at the end of the day, you know, as well as I do, that all free trade negotiations actually begin at home. Every negotiator needs to understand in fine detail both the strengths and weaknesses of his own domestic centre in order to forge a deal which makes sense. The final political point I would make is this: In India, in China, in Southeast Asia, the key political question is – can we arrive at a formula that would expand a rising middle class and give the children of the middle class a sense of optimism for the future? So whilst we all have defensive interests, let's also try to look beyond that. And if we can truly create a world with arrangements that expands the middle class, I think we will achieve those goals.

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MINISTRY OF FOREIGN AFFAIRS

SINGAPORE

9 SEPTEMBER 2019