SPEECH BY GEORGE YEO, MINISTER FOR TRADE AND INDUSTRY, SINGAPORE, AT THE ASEAN BUSINESS FORUM IN BANGKOK ON 14 OCT 02

At our recent meeting in Brunei, ASEAN economic ministers agreed on a number of major initiatives to liberalize our economies and promote greater economic integration in the region. We also took steps to strengthen our economic links to China, Japan, Australia and New Zealand, and India.

ASEAN has held together despite the Asian financial crisis and the global economic downturn. In fact, we have emerged stronger and more resilient.

Unlike many other regions in the developing world, we have kept our relations soft and friendly. In every country, the domestic political situation has improved. Being strategically important to the major powers of the world, ASEAN is now being courted by all of them. This gives us political and economic diversification. We have joined the rest of the world to combat global terrorism. Thus, both internally and externally, ASEAN's position has improved and we have now entered a new phase in our history.

Thailand-Singapore Partnership within ASEAN In APEC and ASEAN, Thailand and Singapore share common approaches to trade liberalization and regional economic integration. Both Thailand and Singapore are strong supporters of the multilateral process at the WTO.

Khun Supachai's appointment as the first Director-General of the WTO from the developing world is very symbolic. Both Thailand and Singapore also believe that regional and bilateral FTAs, which are WTO-consistent, can help push forward global trade liberalization. The economic relationship between Thailand and Singapore is strong and getting stronger. Singapore is Thailand's third largest trading partner, after Japan and the US. Our bilateral trade has been growing steadily over the years, from S$10.8 billion in 1992 to S$18.7 billion in 2001. In the first eight months of this year, our bilateral trade expanded 6.9% over the same period last year. Singapore's import from Thailand grew 7.2%.

Singapore is a major investor in Thailand. In terms of net flow of FDI into Thailand, Singapore has been ranked 3rd consistently from 1998 to 2000. In 2001, Singapore became Thailand's largest investor. For Q1 of 2002, Singapore continued to be Thailand's top investor, with US$202m worth of net FDI.

Thailand and Singapore are also important markets for each other in tourism. From January to July 02, Thailand welcomed a total of 386,000 Singaporean visitors, an increase of 1.4% over last year. For this period, Singapore was the 6th largest source of visitor arrivals into Thailand. In the same period, Singapore welcomed a total of 157,000 Thai visitors, an increase of 0.6% over last year. With direct air connections from Singapore to Bangkok, Phuket, Hat Yai, Koh Samui, Krabi and Chiang Mai, travel
between both our countries has become very convenient. Our tourism boards
have been promoting Thailand and Singapore jointly to foreign tourists with
considerable success.

Singapore-Thailand Enhanced Economic Relationship

Building on our close relationship, PM Thaksin and PM Goh Chok Tong agreed to deepen our economic cooperation further when they met in Bangkok in February this year. They agreed to promote the idea of "one economy, two countries" for Thailand and Singapore through the Singapore-Thailand Enhanced Economic Relationship (STEER).
STEER envisages cooperation between our two countries in many areas, including agriculture and food, the automotive industry, finance, tourism and transport. We are also looking at ways to work together on the promotion of small and medium sized enterprises (SMEs), productivity improvement and IT development.

Under STEER, two Joint Study Groups (JSGs), consisting of members from the private and public sectors of the two countries, have been set up to explore closer collaboration in the automotive electronic parts and components cluster and the agriculture and food industry cluster. The JSGs have been holding meetings in Thailand and Singapore. We now have a better understanding of each other's strengths and weaknesses, and the
opportunities for partnership. We are also working on ways to facilitate trade, simplify customs procedures, promote investments, share resources and improve the regulatory environment for doing business. For the other areas under STEER, our officials have also been meeting to explore opportunities for better cooperation. Among other ideas, we are looking at tourism investment projects, better air linkages, more information sharing and the possibility of cooperation in the financial sector.

STEER will not only drive greater economic cooperation between Thailand and Singapore, it will also be a pathfinder for greater economic cooperation within ASEAN as a whole. Our dream for ASEAN is 'one economy, ten countries'. With the ASEAN Free Trade Area substantially in effect for goods and our recent decisions to liberalize the ASEAN Investment Area and the ASEAN Framework on Services, we are on our way there. However, with globalization and the rise of China, we are being forced to move forward with greater urgency.

ASEAN's FTA Links

As the country in ASEAN most exposed to the global economy, Singapore has moved faster to strengthen its economic links with other regions in the world. In the last 2 to 3 years, Singapore has concluded FTAs with New Zealand, Japan and EFTA. Negotiations on our FTAs with Australia and the US are likely to be concluded before the end of the year. In all of Singapore's FTA negotiations, we have in mind bringing in the entire region
eventually. Thailand has come to the same conclusion as Singapore and has been discussing FTAs with countries like Australia, Bahrain, India and the US. The Philippines has also expressed interest in bilateral FTAs with other countries.

Our efforts have had a positive demonstrative effect on ASEAN as a whole. When Chinese Premier Zhu Rongji proposed an FTA between China and ASEAN in 10 years, which would make us the largest Free Trade Area in the world in population terms, ASEAN countries reacted positively. Our leaders, when they meet in Phnom Penh in November, will sign a Framework Agreement for this FTA with provisions for an Early Harvest. Japan is also keen to have an FTA with ASEAN. ASEAN's relationship with
Japan is much more complementary than our relationship with China, and we should work on an FTA with Japan in much less than 10 years. Econometric studies show that the welfare gain for ASEAN from an FTA with Japan is very high. Thailand will be a major beneficiary. We should be flexible on agriculture so that it would not become a stumbling block. To the pleasant surprise of all the ASEAN ministers in Brunei, India also announced its desire to work towards an FTA with ASEAN in the long term. At Brunei, we also signed a Ministerial Declaration on a Closer Economic Partnership between ASEAN and Australia and New Zealand. All these are positive developments. Our strategy in ASEAN must be to move closer to all the major economic regions in the world. In the last two years, the US and the EU have also shown greater interest in closer economic links with Southeast Asia.

Our common objective is to make ASEAN a single economic space for trade and investment. Collectively, we can be one of the most competitive regions in the world. For political and economic reasons, China wants to have close links with us. For American, Japanese and European investors, they want Southeast Asia to be an alternative manufacturing base to China for their companies. India does not want to be left out. We are therefore in a good position to be friendly with everyone and thereby maximize our economic opportunities. It is also important for us to strengthen the protection of
intellectual property in ASEAN and make that one of our key selling points to MNCs.

Conclusion

The economic integration of Southeast Asia should not only be driven top-down, it should also be pushed from bottom-up. ASEAN businessmen should organize themselves, nationally and regionally, to put pressure on political leaders to move faster. Oftentimes, politics move slower than economics, and there are always vested interests opposed to change. China's competitiveness is a huge challenge to Southeast Asia. If we reposition ourselves well, and quickly, we will benefit from China's growth. If we don't, the process of adjustment, which must still come eventually, will be that much more painful.
Many analysts believe that the US will invade Iraq by early next year with or without Security Council approval in the UN. We can expect oil prices to spike when that happens. There is a danger that the global economy may go into a double dip, which means another round of difficulties for all of us. ASEAN cannot stand still. Either we push forward or we will fall behind. Thailand and Singapore should work hand-in-hand with all the other countries of ASEAN to remake ASEAN and secure a better collective future
for ourselves and our children.