Japan has been a major and important source of investments for Singapore. They started with a trickle in the 1960s, but by the late 1970s, had become significant.

The 1980s after the Plaza Accord and the rise of the Yen in 1985, saw a surge in Japanese investments in Singapore concentrated in manufacturing and construction. As Japanese manufacturing investments became more capital intensive, Singapore became a major production hub for Japanese electronics and chemicals manufacturers. Your companies also increased their investments in services, especially in the financial, wholesale and retail trade sectors.

By bringing in technology and manufacturing expertise, you have built up our industrial capability. Japanese investments have moved from low-tech consumer electronic appliances to sophisticated high-tech products like disk drives, semiconductors, computers, computer peripherals and telecommunication equipment. These are high growth areas which have contributed strongly to our economic growth. Sumitomo and a consortium of Japanese investors built Southeast Asia’s first petrochemical complex in Singapore in 1984.

Japanese investments in services enhanced Singapore’s position as a regional services hub. Japanese banks have a strong presence here and are among the largest lenders in our Asian Dollar Market. In addition, they play an important role in facilitating the inflow of Japanese direct investments, and servicing Japanese corporations in the region.

Japan is now the second largest investor in Singapore after the US, [As at end 1997, the cumulative stock of Japanese total equity in investment in Singapore is more than S$23 billion] with a strong presence in nearly all major sectors of our economy. There are about 1,700 Japanese companies in Singapore, accounting for about one-third of the 5,000 MNCs operating here.

Japanese companies employ about a third of the total 180,000 workers hired by MNCs in the manufacturing sector.

Japanese management have also brought valuable labour management and productivity practices to Singapore. Work Improvement Teams (WITS), Quality Control Circles (QCCs), On-the-job Training (OJT) etc. – were all learnt from Japanese companies, helping our workers improve productivity and work quality.

I am encouraged that many Japanese companies have upgraded their operations by locating in Singapore their regional headquarters and key business operations like finance, sales, marketing, and procurement. They have moved into high value-added activities such as Research & Development. Matsushita Electronics (Singapore) has become the group’s first R&D centre outside Japan to support Matsushita Electric Industrial’s 17 audio facilities world-wide. I hope more Japanese companies will undertake knowledge-driven activities like product development, design, engineering and e-business development in Singapore.

Conditions have not been easy for Japanese businesses for the past few years. Japan’s economy has suffered 2 years of recession. There is concern that Japanese companies may be losing their competitive edge.

Japan blazed the trail for the industrialisation of South Korea, Taiwan, Hong Kong and Singapore. Japanese practices were studied, adapted and adopted, especially in South Korea. But new technology, especially IT, the changed economic conditions and the end of the Cold War, have put the Japanese model at a disadvantage. Japan has had to open up her domestic market, including her banking and financial services. In response, Japanese companies are restructuring to become more competitive, giving more attention to returns on equity and to shareholder value.

In an era of rapid technological change, Americans have shown that those countries with the largest number of start-ups, especially in the IT industry, which venture capitalists finance, will be winners in this next phase. The Japanese are going to catch up, as will the Koreans and the rest of East Asia.

However Japanese, Koreans and other East Asians have to accept some fundamental cultural changes to compete in a globalised marketplace. Those whose cultures help them to absorb and embrace talented people of different cultures to be part of the new corporate culture will have an advantage. Japanese and East Asians are ethnocentric, close-knit societies. They do not easily absorb foreigners into their midst. There has to be a fundamental change in cultural attitudes before Japanese and other East Asians can compete with the Americans who, because of their different history, easily absorb peoples of different cultures and religions into their corporate teams. I am therefore encouraged to see a French Chief Operating Officer from Renault working in Tokyo to make Nissan competitive.

Other changes are happening. Japan’s financial Big Bang has set off a new round of mergers between Japanese financial institutions. Foreign banks are entering and acquiring Japanese institutions, something unheard of just a couple of years back. Japan’s financial sector will be stronger from such consolidation and restructuring.

Most Japanese corporations, especially those in the electronics sector, like Sony, Toshiba, Hitachi and Matsushita, have set bold targets for restructuring and are achieving them. They recognise the need to eliminate the 3 excesses in capacity, payroll and debt and focus on corporate governance and shareholder value. More companies are introducing performance-related pay and stock options to motivate their employees.

Promising new growth sectors, including IT, are emerging in Japan. Although behind the US in Internet and electronic commerce, Japan will catch up. Internet commerce in Japan has more than doubled between 1997 and 1998. It is expected to boost Japan’s GDP by about 4% over the next 3-5 years, and by 13% over the next 5-10 years [Study commissioned by the Electronic Commerce Promotion Council of Japan. Quoted in FEER, 29 Jul 99.] A new breed of bright and creative entrepreneurs are driving the IT revolution in Japan forward.

Confidence in the future growth of Japan has brought foreign funds pouring into Japan. In the first 11 months of 1999, direct investments into Japan surged by 35%. In value terms, this was a record 1.7 trillion Yen, exceeding the 1.3 trillion Yen achieved in the whole of 1998. The Nikkei has performed well as optimism returns.

JCCI has an important role to play. It has grown along with Singapore. Established in 1969 with an original membership of 56 companies, the JCCIS now has close to 850 member companies that employ over 100,000 Singaporeans.

In the early 1970s, JCCIS used to finance study tours to Japan for our undergraduates. Later, it established a scholarship programme for studies in Japan. In 1983, JCCIS and the Singapore Government jointly set up the Japan-Singapore Technical Institute, to train skilled technicians in Singapore. As recently as 1998, it provided invaluable feedback on the government’s cost-cutting measures to help Singapore tide over the Asian crisis.

As both our economies transit into the knowledge-based era, I encourage the JCCIS to work with our economic agencies to facilitate link-ups between the start-ups from the two countries. JCCI can also help to further promote business partnership between Singapore and Japanese SMEs. One idea is to establish a Japan SME Centre in Singapore for those Japanese SMEs keen to explore business opportunities in this region.

For the medium term, JCCIS should explore new ways to deepen the excellent ties between our two economies. There is scope for further integration of our services sectors through co-operation in the high-growth areas of IT, e-commerce and finance. All businesses have to develop these new platforms to expand their market reach. A Japan-Singapore Free Trade Agreement, which both countries have agreed to study, could provide such a platform.

The Singapore government values the part JCCIS has played in fostering close relations between the two countries, and encouraging Japanese companies to become key partners in Singapore’s development. Your chamber has contributed to Singapore’s progress in the last 30 years. I look forward to your continued contributions in strengthening bilateral ties, and deepening the mutually beneficial partnership between Singapore and the Japanese companies.

Finally, may I congratulate you on your 30th Anniversary Celebration, and wish you all the best for the future.

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