Mr Chairman Sir,

I thank the many MPs for their questions and suggestions on our maritime and port sectors.  I will now provide an update on our performance, as well as what the Ministry is doing to remain competitive.

Performance of the Singapore Port

First, let me begin with the Port, which is an essential pillar of our International Maritime Centre, or IMC.

Mr Andy Gan asked about PSA’s performance.  The departures of Maersk in 2000 and Evergreen in 2002 were indeed lessons well learnt.  Since then, PSA has enhanced its competitive position by continually restructuring costs, raising productivity and most importantly, responding proactively to its customers’ needs.  Their efforts have resulted in tangible achievements. 

Between 2001 and 2005, PSA’s throughput increased by some 40%, and PSA also enjoyed a healthy profit of over S$1.2 billion for financial year 2005.  The Singapore port operations, which contributed the majority of the Group’s profits, registered a strong increase of 21.4%.

Sir, we have retained our position as the world’s busiest port by vessel tonnage, with total tonnage rising 10% to 1.15 billion gross tonnes.  Singapore is also the top bunkering port, with bunker sales growing 8% to reach 25.5 million tonnes, double that of our nearest rival.   

Notably, Singapore overtook Hong Kong to regain the position as the world’s busiest container port again, having lost the lead since 1998.  The Singapore port itself handled 23.2 million TEUs of containers in 2005.  Our throughput growth of almost 9% compares well with the 2% recorded by Hong Kong, 4% by the Port of Tanjung Pelepas (PTP) and 6% by Port Klang. 

If world trade continues to boom and fuel container shipping growth of about 6% per year, we estimate that throughput will double in about 12 years' time.  For planning purposes, we have therefore made preparations for our ports to have the capacity to handle 50 million TEUs by 2018.

Maintaining our Competitive Advantage

Sir, despite our favourable market position, we cannot take our customers nor our good performance for granted.  Regional ports are competing hard to increase their share of the container transhipment business.   It is therefore critical that the Maritime and Port Authority of Singapore (MPA) and our port operators work hard to remain competitive.  And to ensure this, we have adopted three main strategies. 

Firstly, we must continually build on and improve our port infrastructure to meet the needs of shipping lines.  As mentioned, we are doubling capacity by 2018.  Besides reclaiming more port land at Pasir Panjang Terminal over the next few years, we are also looking at a number of options to raise capacity beyond the expansion of Pasir Panjang Terminal to meet the longer-term growth needs of our ports.   

Second, we need to ensure that we maintain our edge in operational efficiency, connectivity as well as costs.  For instance, Singapore has launched  an integrated platform called the TradeXchange, that will provide a single common access to existing trade systems such as TradeNet, Marinet and PortNet, from October next year. 

Third, our terminal operators must continue to keep in close touch with their customers and remain responsive to their needs.  For example, more shipping lines are now keen to co-invest in dedicated terminals to gain assurance of capacity.  Our port operators must allow for this.  Already, PSA has entered into joint ventures with major shipping companies like COSCO and the Mediterranean Shipping Company to operate dedicated terminals. 

PSA’s Internationalisation Efforts

Mr Andy Gan also asked about the impact of the purchase by Dubai Ports World (DPW) of P&O ports on PSA’s internationalisation efforts. 

Sir, P&O operates some 29 ports around the world, with a strong presence in South Asia, Australia and the US.  Acquisition of P&O would have helped PSA expand overseas in new markets, amid growing competition in the industry. 

However, as the bidding for P&O intensified, PSA, after careful consideration, decided that it would not be to its interest to make a higher counter-bid for P&O.  There are still many opportunities in the global marketplace of ports.  I am sure PSA will continue to be on the lookout for attractive projects to increase its international footprint. 

On the Government’s part, we will continue to closely monitor key industry trends, such as consolidation and vertical integration in the global port and shipping sectors.  And where necessary, we will adjust and adapt quickly and flexibly to maintain our port competitiveness.

International Maritime Centre

Sir, now let me move on to the International Maritime Centre itself.  Mr Ong Kian Min, Mr Andy Gan and Mr Yatiman Yusof have asked about the progress in developing of the IMC.  I am pleased to report that we have made noteworthy progress.

Ship owners and operators are the cornerstone of an IMC.  They are the primary generators of demand for other maritime ancillary services such as ship management, ship broking, marine insurance, finance and legal services.  Our fiscal incentive schemes such as the Singapore Registry of Ships or SRS in short and the Approved International Shipping Enterprise or AIS in short, are therefore designed to encourage a core group of ship owners and operators to set up in Singapore.  Both schemes have had some measure of success.

The Singapore Registry of Ships is now the 5^th largest merchant fleet in the world, with more than 3,200 vessels totalling 33 million gross tonnes, flying the well-respected, quality Singapore flag.  This is an improvement from our 7^th position and an increase of more than 40% since 2002. 

Under the AIS, we have a stable of 68 international shipping groups.  In 2005 itself, we registered a strong 50% increase, with reputable global players like Norgas Carriers, Teekay Shipping and J Lauritzen joining our cluster.  With more reputable names in our maritime fold, our cluster has increased in prominence.  AIS companies have committed to generate business spending in excess of S$2.5 billion annually. 

It is therefore fitting that the Minister for Finance should announce in this year’s Budget that the AIS scheme will be extended by a third 10-year term, bringing the maximum incentive period for qualifying shipping companies to a total of 30 years.  This extension will provide ship owners and operators with greater certainty to develop their business in Singapore for the long-term. 

Developing Maritime Ancillary Services

The surge in the Registry tonnage and the rise in the number of AIS participants can only mean multiplier effects for the maritime ancillary services.  These are however uneven across the different ancillary services.  Sir, there are some services which are sticky and more resistant to relocation to Singapore which include financial, insurance and legal services.  Nonetheless, the Government will continue to direct more efforts at attracting such services here by working closely with industry partners to identify gaps which we can fill. 

Mr Wee Siew Kim asked about the promotion of ship financing structures.  Singapore’s growth as a base for shipping companies has also spurred the growth of ship financing activities here.  We have already a number of major foreign ship finance banks, but with the slew of newbuildings, especially from Asia-based ship-owners, and an already well-developed financial sector in Singapore, there is clearly an opportunity for us to do more, and aspire to be Asia’s ship financing hub. 

The new Maritime Finance Incentive, or MFI, will target alternative ship financing structures such as shipping funds and shipping trusts.  It provides tax exemption for ship investment vehicles and a 10% concessionary tax rate for ship investment managers.  This incentive can bring ship ownership and investment beyond traditional ship owners to institutional investors and even the investing public.  Beyond just adding to the growth of our economy and in particular, the financial sector, the MFI will make Singapore a more comprehensive one-stop location for all the stakeholders.

Since the budget speech announcement, I am glad to inform the House that we have actually received positive feedback and strong industry interest in this scheme. 

Manpower Development & Maritime Research

Mr Yatiman Yusof also asked about manpower development.  Indeed, this is an integral part of our IMC strategy.  In 2002, the MPA has set aside $50 million over 5 years under the Maritime Cluster Fund to give maritime training a boost.  To date, we have spent about $24 million on various manpower development programmes and tie-ups with universities and institutions.  And I would like to assure Mr Yatiman that these are opportunities open to both Singaporean and foreigners.

Also, our position as a leading port and maritime centre can only be sustained if we build up capabilities in the area of commercial and technical research.  To this end, MPA and NUS has set up the Centre for Maritime Studies (CMS) to focus on research on maritime business issues in June last year.  Maritime R&D received a further boost with the launch of the NOL Fellowship Fund to fund research in key transportation and logistics issues. 

SMEs

Sir, Mr Ong Kian Min raised a question on how our local shipping SMEs will fit into the plan to develop Singapore as an IMC.  I wish to assure Mr Ong that both SMEs and global shipping groups are very important complementary components of our IMC strategy.  SMEs in fact make up the majority of companies in the maritime services sector, performing critical functions in areas such as ship agency and crewing, bunkering and ship chandling, just to name a few. 

As the IMC in Singapore grows, SMEs will also benefit from the larger market and expertise brought in by international shipping groups.  Singapore shipping SMEs are therefore well placed to grow into world beating companies.  One such example is Pacific International Lines or PIL. 

Conclusion

Indeed, as we strive to develop as a world class maritime centre, our aspirations must be greater than just being fast followers of others, but leaders in research, in thought leadership, in industry development and public-private collaboration and partnership. And in this regard, the Singapore Maritime Foundation plays an extremely important role in terms of facilitating networking amongst different sub-sectors, profiling the industry as well as leadership in marketing and promotional efforts for seminars overseas. 

We have the advantage of being along a major maritime trade route, between India and China, and in the heart of Southeast Asia, with a first class hub port and a growing and vibrant maritime community. Singapore is well-known for being a predictable, efficient and quality business environment. These are qualities which appeal to the maritime business, given the capital-intensive requirements and the long-term and cyclical nature of the industry, where players seek to minimise sovereign risk arising from the changes in tax or regulatory policies.  Singapore would be well-placed to be the maritime hub of Asia. 

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