Colleagues and Friends

Gala Dinner is a time for merry making. Tonight should be no different even though the mood in the shipping industry is sombre. Your industry must be going through one of its toughest years.

Economic slowdown is always bad news for the shipping industry. Less growth means less consumption. Less consumption means less trade and less shipping. Coupled with over-capacity, this means low or even unprofitable shipping rates.

As a result, I am told many shipping companies are struggling to cut losses, never mind about making a profit. Meanwhile, heightened security measures are adding a lot of friction to cross-border trades. The full impact of global terrorism is still being played out. For us, the bombings in Bali and Zamboanga have further brought home the reality of terrorist attacks in our own backyard.

We are used to dealing with twists and turns in world events. Being small, we have learnt to cope with external shocks. Being small has many disadvantages, but one advantage is that we can be more flexible and nimble to ride the wave, without being drowned by it.

Amidst the many uncertainties, we are also facing tougher competition. But we are not new to global competition. Our goods, whether computer chips or printers have always had to compete in the global market. But what is new is that in the services sector, we are now seeing more world-class players operating in our own backyard.

For instance, in the maritime sector, we now have global players managing ports nearby. It is like Tiger Woods joining the South East Asian circuit. They raise the level of competition, making it a very different ball game.

Competing in the next decade will therefore require very different strategies from the past when we were merely competing in the SEA Games.

That is why we set up the Economic Review Committee to solicit ideas from the industry to help us remake our economic model. Many of you have put in valuable hours to help formulate strategies that will ensure Singapore’s continuous relevance in the global economy.

In particular, many SSA Councilors have joined Mr Wong Kok Siew in his Logistics Working Group to help think through how we can consolidate Singapore’s traditional strength as a transport & logistics hub. On behalf of the ERC Services Sub-Committee, let me take this opportunity to thank you all for your valuable contributions and hard work.

Mr Wong Kok Siew and his Working Group are convinced that Singapore can succeed as a leading global integrated logistics hub, despite the strong competition. They have good basis for their optimism.

First, the transport & logistics industry is a rapidly growing industry. Worldwide, it has been growing at 3 – 10 % pa. The growth forecast of the Asian market is even higher, at 15% pa, higher than that of Europe or N America.

Second, the industry is growing in sophistication, as shippers see benefits in outsourcing their logistics functions to supply-chain-management specialists. In US and Europe, shippers have already outsourced 25% of their logistics functions. In Asia, the extent of outsourcing remains low at 2.5%, making its further expansion a certainty.

Third, Asian shippers have shown strong interest to exploit IT technology to revamp their supply chains and integrate them with their global operations.

These developments open up opportunities for our transport & logistics players to provide value-added specialist services and to grow globally.

To seize these opportunities, the Logistics Working Group has recommended that we pursue what it called a "London Plus" development strategy. The idea is to build upon our existing strength as a regional transportation hub to acquire new capabilities that will allow us to leapfrog our competition and achieve a sustainable competitive advantage.

Singapore’s strength has been our physical hub. Our airport and seaport are highly efficient and reliable, with extensive linkages to all parts of the world. This excellence enables us to move goods of a wide variety at high speed to all corners of the globe. We also have a very large and active ship registry.

Beyond excellence as a physical hub, we now need to acquire new competence equivalent to London’s as an international maritime centre. Specifically, we need to expand our growing pool of ship operators, as well as maritime and logistics companies to provide specialist services in ship financing, ship brokering, legal services, supply chain management and e-logistics.

This is the knowledge or IP (Intellectual Property) component of the maritime and logistics industry. The key is to leverage on our world-class physical hub to move up into the next level of competition. In this way, shipping lines will not only have an efficient port to come to, but will have access to a suite of mutually supporting maritime services, such as ship management and maritime arbitration. What should we do?

First, we need to ensure cost competitiveness and retain our physical hub excellence. We need to refine our port infrastructure, cost and pricing structures, streamline regulatory requirements, ensure that our bunkering and ship repair industry remains competitive, as well as develop the shipping companies’ IT capabilities.

Second, we need to attract global maritime activities to Singapore. We have the Approved International Shipping Enterprise Scheme to attract ship operators and the Approved Freight and Logistics Enterprise Scheme to attract ship managers, ship agents and logistics operations set up by shipping companies to provide clients with an end-to-end supply chain. We will continue to revise our schemes as necessary to make them relevant.

Third, we need to enlarge our local pool of highly trained and experienced maritime professionals to strengthen the transport, logistics and supply chain management research capabilities. MPA has set aside $50 m in the Maritime Cluster Fund for the education and training of local professionals in the maritime sector.

Fourth, we need to speed up the development of supportive services such as maritime finance, insurance and legal services. Among other things, we also want to position Singapore as the base for international maritime organisations to conduct their regional activities here. Their activities will help to create a vibrant maritime cluster here.

The recent 10-day shutdown in US ports has shown how fragile the modern global supply chain has become. As Barbie dolls and Disney toys got stranded at seas, US importers are biting their nails, praying that they can get the toys off the ships onto their store shelves in time for Thanksgiving (on Nov 28). Meanwhile factories in Shenzhen are scrambling to find extra warehouse space!

A minor disruption in trade flow nowadays can have big impact on factories half a world away, and takes weeks for the flows to be set right again. In the past, a 10-day shutdown would not have caused any anxiety as large inventories would have buffered any sudden interruption in supply. But just as the electronics industry has moved to just-in-time manufacturing, departmental stores have moved towards just-in-time retailing. Toys and clothes are reordered only when they move off the shelf. Retailers keep less stock on hand, and suppliers are expected to make timely deliveries of smaller orders.

It is now a finely tuned system, so even a small hiccup can bring it to a halt. That was what the US ports’ shutdown has done. Like our acoustics-perfect Concert Hall in the Esplanade, it is unforgiving of even minor errors.

This means a more challenging time. But it also means opportunities for shipping companies with faster and more reliable delivery schedules and logistics firms with better handle over supply-chain management. All these call for world-class capabilities and a greater depth in the knowledge component of the maritime & logistics industry. This is an opportunity for Singapore. Hence the focus of the Logistics Working Group.

But formulating strategies is the relatively easier part. Executing them will differentiate between achieving potential or missing targets.

The "London Plus" strategy can only succeed with your active engagement. As the collective voice of the Singapore shipping industry, the SSA has an especially critical role to play.

With your commitment, I am optimistic that we can become London Plus. On this note, let me wish the SSA a Happy 17^th Anniversary.

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