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Going Global Pays OffGoing Global Pays Off

COVER sTORY – TRADE FOCUs sPECIAL

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 past two centuries, it was not surprising that a department should have existed even then to handle all matters pertaining to trade.

Located in the Ministry of Finance (MOF), the Department of Trade was responsible primarily for processing export and import documentation. During this period, the economic structure focused primarily on export and investment, and the department’s priority was finding buyers for Singapore products – mainly electronics items at the time.

Throughout the decade and right up to the formation of the Ministry of Trade and Industry from MOF’s Development Division in 1979, trade activities centred around export and foreign investments. Attracting foreign investors called for economic openness and a high level of support.

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. A secure financial infrastructure was set in place, and backed by political stability, it successfully attracted companies from around the globe to invest in Singapore.

Back to entrepot By the 1980s, however, the world trade situation had become one of increasing protectionism. Given the degree to which Singapore’s prosperity depended on external markets, MTI responded by establishing a statutory board solely for the purpose of promoting exports.

The Trade Development Board (TDB) was accordingly inaugurated in 1983. More flexible than a government department and better able to represent the interests of the private business community, the TDB’s priority – compared to that of the Trade Department – lay with promoting imports for the re-export and transhipment trade.

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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 OffGoing Global Pays Off

The then-minister for trade and industry, Dr Tony Tan, said: “The success of establishments like Jetro, Kotra (in Japan and Korea) and similar bodies in Taiwan and Hong Kong lent credence to the belief that such a statutory board would serve a useful purpose in Singapore.”

The TDB’s early activities were fairly humble: the board started out processing trade documents and monitoring trade levels. Its promotion efforts were initially limited to the publication of trade directories and newsletters listing exportable goods and services, and pointing out trade opportunities to overseas companies.

Over the next decade, however, as awareness of Singapore as a trade hub grew, the scope of the TDB’s efforts expanded commensurately. The department went on to establish overseas offices from London to Sydney and Mumbai to Washington: a network which has, today, increased to over 30 offices worldwide.

This heightened international presence, combined with Singapore’s accession to the General Agreement of Tariffs and Trade

(Gatt), expanded the TDB’s role still further. The monitoring of trade processes was brought under the department’s purview, as was the task of ensuring that international rules and procedures were complied with.

At the same time, the increased volume of trade brought in by participation in Gatt sent the importance of swift and accurate documentation rocketing. The immediate result of this was a groundbreaking development: TradeNet, a nationwide system for automating the processing of trade documentation.

Introduced in 1989, TradeNet was the first such nationwide system in the world, and was wildly successful. Not only did it put Singapore on the map in terms of trade and technology, but it also stepped up trade efficiency nearly four-fold. Within the year, half of all trade documents were processed through TradeNet, saving billions of dollars in overheads and man-hours.

As if celebrating this achievement, total trade in the following year exceeded the $�00 billion mark. The figure heralded a busy decade for the TDB. Trade liberalisation had extended the department’s portfolio significantly: throughout the 1990s, Singapore’s presence in regional and international bodies ranging from Asean to the World Trade Organization began to grow, and the department was responsible for representing Singapore’s trade and economic interests within these organisations.

It was also during this period that the economic focus gradually shifted towards facilitating the attempts of domestic companies to move outwards. Singapore’s international presence having been firmly established in the past decade, there was now room to more closely examine the role of Singapore-based companies in economic growth.

The then-prime minister Goh Chok Tong said in his New Year message: “For the next ten years - we must participate and ride on the growth in the region. If we do not trade with, invest or work in these fast-growing countries, we will miss the boost they can give us.”

The TDB accordingly implemented a wide range of support schemes during the early 90s, aimed at helping local companies that wished to internationalise. They included assistance in franchising, obtaining international certification and licensing. Simultaneously, the TDB began to act as secretariat for a number of business groups aimed at enhancing Singapore’s competitive advantage in various countries. 1994 marked the passing of the $3 billion mark in trade, a net 50 per cent increase in total trade in just four years. The trend continued: despite a 7.5 per cent decline brought about by the 1997-98 economic crisis, trade rebounded spectacularly in �000 to pass the $400 billion mark.

In the same year, the TDB launched the Approved Cyber Trader Scheme to encourage the setting up of regional e-commerce trading centres in Singapore, and the online version of the Trade Finance System. These systems had been preceded by GlobaLink and Statlink in 1995 and 1996 respectively, both aimed at bringing the TDB’s services up to date with the increasing prevalence of Internet technology.

Statlink in particular was a first in the history of global trade: it allowed trade

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statistics to be loaded on to the Internet concurrently with their release to the media, a service which no other country had yet made available.

From trade to enterprise In �00�, the changing nature of Singapore’s internationalisation strategy and the TDB’s role in that plan were reflected in the restructuring of the TDB as International Enterprise (IE) Singapore.

The department’s mission was reworked to focus on helping Singapore-based companies to grow and internationalise – a natural next step for an organisation that previously specialised in the facilitation of trade.

Chong Lit Cheong, IE Singapore’s CEO, said: “This was in response to growing recognition of the importance of expanding beyond our shores for Singapore companies and our economy as a whole to enjoy continued and sustainable growth.”

In April �00�, IE Singapore was inaugurated under the auspices of the Ministry of Trade and Industry. Its mission since then has been to provide support and services to Singapore-based

companies which aim to expand their operations abroad.

Singapore brands that have become internationally renowned with the assistance of IE Singapore include such well-known companies as BreadTalk, Banyan Tree, ST Electronics and many more – names which are not only well-known, but linked with Singapore in the eyes of their foreign partners and investors.

The newly renamed IE Singapore went on to establish the Singapore Chamber of Commerce and Industry in China, and followed this by launching a series of programmes and forums outlining new strategies for Singapore-based companies to internationalise.

These included the International Partners Programme (iPartners), which encourages companies to work in groups to compete internationally. As of November �006, IE Singapore has helped form �5 alliances involving collaborations among 1�9 companies.

Moving forward In a speech at the opening ceremony of last year’s IE Forum, Minister for Trade and Industry Lim Hng Kiang said: “We hope to

see more high-growth companies emerging in Singapore. Importantly, we would like them to use Singapore as their home base and springboard, to spread their wings into the region and beyond.”

With a broad-based spectrum of programmes aimed at upgrading the 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.”

singapore’s Economy: Then And NowVikram Khanna looks at three key trends in the transformation of singapore’s economy in the last 30 years.

1976, when it was dominated by wholesale and retail trading. Today, financial and business services, taken together, account for around 36 per cent of the service sector.

Singapore has emerged as a major financial centre in the region providing services that include foreign exchange, financial futures and derivatives trading, offshore banking, asset management, mergers and acquisitions and private banking - which were either nascent or non-existent in the 1970s.

The Stock Exchange of Singapore, inaugurated in 1973 (now known as the Singapore Exchange), currently has 693 listings, including more than �00 companies from �0 countries.

New patterns of trade: China and India loom large Between 1977 and �005, Singapore’s non-oil domestic exports rose �� fold to $154.6 billion. While the United States, the European Union, Malaysia and Japan have remained major markets throughout that period, the marked change has occurred in respect of China and to a lesser extent, India.

In 1977, China was a tiny market for Singapore, absorbing only $145 million

The changed face of manufacturing and services The Singapore economy has changed significantly since 1976. In terms of size, it has grown by more than 10 times to a GDP of $194.4 billion at the end of last year. While manufacturing and services have been the mainstays of the economy, the composition of both has changed markedly.

For instance, in 1979, machinery and appliances accounted for �8.7 per cent of manufacturing value added, and the electronics sector was not large enough to warrant being classified as a separate category. Petroleum products also ranked high in 1979, accounting for 18 per cent of value added. However, by �005, the share of machinery and equipment in total manufacturing value added had fallen to 7.3 per cent.

Electronics alone accounted for 36 per cent of value added. The second largest sector was pharmaceuticals (16.4 per cent), which includes the biomedical and life sciences segment – new thrust area – followed by chemicals (8 per cent). Precision engineering and marine and offshore engineering have also become key clusters in the new manufacturing landscape.

These shifts have partly reflected a deliberate strategy to restructure the economy towards higher-value added activities. Now, Singapore is harnessing R&D to move further up the value chain in areas including electronics, biomedical sciences and chemicals.

The services sector, which accounts for 63 per cent of Singapore’s GDP, has become much more diversified since

worth of goods, or barely 0.7 per cent of Singapore’s total exports. By �005, non-oil domestic exports to China had rocketed more than 100 fold to $15.0 billion and China accounted for 9.7 per cent of Singapore’s total exports. China’s share of Singapore’s exports has thus increased by more than 13 times over that period.

This reflects, first, the spectacular growth and internationalisation of China’s economy over that period – China started to open its economy in 1978 – and second, China’s emergence as the centre of the global supply chain, especially for electronic goods, in which Singapore is also a key player.

India was a slightly larger market for Singapore than China in 1977, but it, too, was small, absorbing less than $350 million (or 1.7 per cent) of Singapore’s exports. By �004, Singapore’s non-oil domestic exports to India had leapt to $5.1 billion and India’s share of Singapore’s total exports had doubled. In recent years, India has emerged as Singapore’s fastest growing trade partner.

COVER sTORY – ECONOMY OVER THE YEARs

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Going regional and global:an accelerating trend Given its relatively small domestic market, Singapore’s economic strategy on trade was always outward-oriented. When it came to outward investment, many companies have been investing regionally since the 1970s. However, Singapore’s regionalisation drive accelerated after 1993, when then Senior Minister Lee Kuan Yew called for ‘a second wing’ for the Singapore economy.

Overseas investment by Singapore companies grew at an average of �9 per cent from 1993 to 1997, the year of the Asian crisis. Between 1998 and the end of �004, the stock of Singapore’s direct investment abroad more than doubled to $17�.� billion, close to 100 per cent of Singapore’s �004 gross national income.

Most of Singapore’s FDI was in the area of financial services, manufacturing and commerce. The biggest recipient countries (not counting locations in the Caribbean and Latin America, which were used as channels for investments by holding companies) were China, Malaysia, Indonesia, Hongkong, the European Union and the United States.

Asian destinations accounted for $84 billion, or almost one half, of Singapore’s stock of direct investments at end-�004. In Singapore’s regionalisation drive, some of the early flagship projects started in the 1990s were the industrial parks in Suzhou and Wuxi in China and the Information Technology Park in Bangalore, India.

Although these projects hit some early speed-bumps, they were eventually successful. In recent years, Singaporean companies have been investing aggressively overseas to be part of a new international supply chain. They have also sought out new markets, in relatively unfamiliar countries such as Russia, Kazakhstan and Libya, plus the Middle East.

Today, Singapore companies such as Keppel, Sembawang, Ascendas, Capital Land, NOL and Asia Pacific Breweries are well-known overseas. Even smaller companies, such as BreadTalk, OSIM and Want Want have established their names outside Singapore.

The Singapore government now has a dedicated agency – International Enterprise Singapore – which helps companies internationalise. It has also signed 11 free trade agreements with major trading partners, including the US, the European Free Trade Association, Japan, Australia, India and Korea. These provide a range of benefits to boost Singapore companies’ overseas investments, including preferential access to certain sectors, faster market entry and Intellectual Property (IP) protection.

By �01�, Singapore’s Ministry of Trade and Industry expects Singapore’s direct investments abroad to cross $300 billion, and earn annual returns of around 8 per cent.

About International Enterprise Singapore

International Enterprise (IE) Singapore is an agency under the Ministry of Trade and Industry spearheading the development of Singapore’s external economic wing.

Our mission is to promote the overseas growth of Singapore-based enterprises and international trade. With a global network in over 30 locations and our “3C” framework of assistance – Connections, Competency, Capital, we offer services to help enterprises export, develop business capabilities, find overseas partners and enter new markets. At the same time, we work to position Singapore as a base for foreign businesses to expand into the region in partnership with Singapore-based companies.

MissionTo promote overseas growth of Singapore-based enterprises and international trade

VisionA thriving business hub with globally competitive enterprises and leading international traders

Please visit www.iesingapore.com for more information.

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COVER sTORY – COMPANY PROFILE, CWT

From Local To Global PlayerWe look at one company’s growth into global expansion over the years.

CWT was one of the earliest container depot operators and trucking companies in Singapore, with the initial shareholders being notable names: PSA, DBS Bank, Intraco and NOL. Set up in 1970, the company was formed to prepare for the advent of containerisation in Singapore.

The primary focus of CWT then was to build up Singapore’s container trucking capabilities, establish container depot operations and prepare for land-based container operations that would be needed with the onset of container terminal operations by PSA.

CWT was subsequently listed in 1993 on the Singapore Exchange (SGX). The company has been performing well following an aggressive expansion route embarked on by the company early this year. Group earnings more than doubled for FY�005, compared with the previous

year, with net profit jumping 175 per cent to a record $9.5 million. Never one to be easily contented, Mr Loi Kai Meng, Chairman of CWT, is still actively seeking operational capabilities in the region.

“We are capitalising on our strong presence in Singapore, to grow our business internationally,” said Mr Loi. “This will continue to be the key focus of our group, as the company continues to accelerate its growth in Asia as well as around the region.”

As one of the major logistics players in Asia offering integrated logistics solutions, CWT services some of the world’s best known brands in the chemical, fast-moving consumer goods, healthcare, electronics, automotive and industrial sectors. Revenue growth last year came mainly from its non-vessel common carrier (NVOCC) or freight forwarding business.

This can be attributed to its expanding subsidiary, CWT Globelink. In 1996, CWT acquired a 51 per cent equity stake in a local freight forwarding group, Globelink Forwarders Pte Ltd, and its subsidiaries. The acquired company was named CWT Globelink Pte Ltd. In �00�, CWT successfully acquired the remaining 34 per cent shares in CWT Globelink, making it a wholly owned subsidiary of CWT, thus strengthening the group’s global distribution logistics business. Today, CWT Globelink, the freight-forwarding subsidiary of CWT, provides the global reach to the group’s logistics solutions, with around 50 offices covering some 150 main ports and 1,800 destinations worldwide.

The logistics capability of CWT was further enhanced when local transport and packaging group, C&P Holdings Limited, became a major shareholder of the company. Currently, C&P holds a total stake of about 75 per cent in CWT.

Geographically, the company has expanded its presence to China, Sri Lanka, Pakistan, Egypt, Thailand, India, Korea, Australia, the Middle East and Malaysia, with astounding results.

“The freight forwarding business is an extremely scalable sector. Every quarter, CWT opens a new office. We plan to keep this up by consistently being on the lookout for suitable areas for expansion,” said Mr Loi, a veteran in the logistic industry with 30 years of experience.

With an annual turnover of more than $�00 million and staff strength of over 1700, the company currently manages more than 1.8 million square feet of warehouse space, as well as a sizeable transport fleet of 65 prime movers, �6 delivery trucks and ��� chassis in Singapore.

The group’s largest warehouse is CWT Distripark, which is also the flagship distribution complex of the group. Built next to the group’s headquarters in the Jurong Industrial Park, CWT Distripark was completed in December 1989 and is one of the largest and most modern distribution complexes in Singapore.

Around the region, the company is the first and only firm to have won the Intelligent�0 Award for four consecutive years, for its e-solutions that provides interactivity, giving customers value-added total logistics management and visibility. The award is the most coveted IT award in the Asia-Pacific, presented annually to �0 companies that make IT work for them by combining the right business focus, the right people, the best business value and the best execution strategy.

These series of articles first appeared in The Business Times, Wednesday, October 18, 2006. Reprinted with permission.