DPM Gan Kim Yong at the QnA Segment of the 30th Nikkei Forum

Moderator (Fumika Sato, Singapore Bureau Chief, Nikkei Inc.): Thank you very much DPM Gan for delivering valuable insights. Now we are moving on to the Q&A session. Firstly, I would like to hear your thoughts on the role of multinational trade frameworks such as CPTPP and RCEP. Amidst global trade turmoil, what role should such multilateral frameworks play? Is there a need to increase the number of member countries or improve their structure and functions? And also, Singapore has been supporting Chian’s application for membership to the CPTPP. Do you think that the existing criteria for accession should be maintained?

DPM Gan Kim Yong: There are many questions in this one question, let me try to answer them one by one. First, the multilateral partnerships like CPTPP and RCEP are very important, particularly in today's world because in this environment, particularly with Liberation Day tariffs imposed by US, I think the global rules-based trading order is being undermined, being weakened. It is therefore important for countries with like-mindedness to find ways to come together, to strengthen our cooperation, to strengthen our links, so that we can continue to move ahead.

It is also important for these multilateral organisations, like CPTPP and ASEAN to demonstrate to the rest of the world that despite this contestation and competition, there is still room for cooperation and collaboration. That is why, even within ASEAN itself, we had a meeting among the ASEAN economic ministers a couple of weeks ago where we emphasised our common shared objective of further integrating ASEAN, deepening our economic cooperation and also expanding our collaboration with other organisations. That is why ASEAN has also started to make arrangements, engagements with organisations like CPTPP and EU as well as the GCC, as I mentioned earlier in my speech, to see how we can come together, to work together, to explore opportunities to cooperate with one another.

An organisation like CPTPP and ASEAN should also continue to see how they can deepen the cooperation within these organisations. At the same time, expand the scope of cooperation among members, as well as extend the cooperation and engagement with other parties. CPTPP, for example, is also working towards having a dialogue with organisations like EU and ASEAN, so that we can talk about how we can work together and continue to push this rules-based trading system. And it is beyond just tariffs and trade, because among these different groupings, there are also opportunities for cooperation in many areas. One example is digital economy. It is also important for countries and regions to come together to work out how can we ensure that our digital systems are more aligned with one another, more interoperable. This will allow the economies to be more integrated among ourselves, and at the same time to also facilitate digital trade.

So I think there are many areas that we can work together. One particular area that I mentioned also in my speech, that is some of the global challenges really require cooperation from everybody to tackle. One example is global pandemics. I think we have just come out of COVID-19, and we can see that from our experience in COVID-19, that we need every country to work together to manage this pandemic. And similarly, if we are faced with another financial crisis, I think it is important for us to find a way to work with one another, to address the challenges of financial crisis. Of course, all of us now are concerned about climate change, and the solution to climate change requires global cooperation too. Therefore, I think it will continue to be important for CPTPP and RCEP to work together, to deepen their cooperation within themselves, expand their cooperation with other partners as well as extend to other areas of cooperation, beyond just trade and investment.

With regard to China's interest in joining CPTPP, as we mentioned, Singapore's position is very clear, we have always encouraged and want to support countries which are ready to join, are able to meet the standards of CPTPP. Beyond China, Indonesia has also indicated interest and has applied to join CPTPP. As a fellow ASEAN member, we are also very supportive of Indonesia's ascension to CPTPP. We really want to encourage more and more countries to come onboard, to work together, to find ways to cooperate with one another. Some may be bilateral, some may be plurilateral, some may be regional. This way we can have many platforms of cooperation. Singapore and Japan, too, have a lot of areas that we can work together, and we certainly look forward to working with Japan next year, but as we celebrate and commemorate our 60th anniversary of diplomatic relationship, I think this is an important milestone for us to explore new opportunities to work together.

Moderator: You are leading a taskforce to address the impact of tariffs on your country. The US, with which your country has an FTA, is demanding a 10% tariff. While the tariff rate is lower compared to other ASEAN countries, the impact is certainly expected. Singapore has already lowered its economic growth forecast for 2025, what specific impact do you anticipate on the domestic economy? Will this lead to worsening business conditions for SMEs or employment environment. How will you counter this?

DPM Gan: I think the impact of the Liberation Day on Singapore has many levels. First, domestically, the immediate impact of the 10% baseline tariff imposed on Singapore, is imposed on most countries, so I think the playing field remains level, but it will add costs to the exports of Singapore to the US. That is the first level. So some of our businesses are recalculating, reevaluating and reassessing the cost of exports to US, and definitely it will impact Singapore in terms of the cost of our exports. That is the first level.

The second level is with this uncertainty about tariffs, and we do not know what the additional tariffs are going to be in time to come, and therefore many businesses are taking a wait-and-see attitude, not just Singapore, but in many other countries. This wait-and-see attitude will cause businesses to hold back their investment decision, their spending, their hiring, and as a result of that, we will see overall economic activity will slow down. This is not just Singapore, this is global. Singapore being a small and open economy, it depends on the global economy to develop and grow. As the global economy slows down, Singapore’s economy will also slow down as a result of this wait-and-see attitude among all the businesses. That is why we have adjusted our economic growth forecast downwards.

The third level, which is more concerning, is that this uncertainty in raising tariffs and reducing tariffs and imposing additional export controls and import regulations, creates a lot of uncertainty. And at the same time, it also undermines the rules-based system. As I mentioned in my speech, one of the key tenets of WTO is MFN, most favoured nation rule, which means that if you give a tariff concession to one country, the same concession must apply to all countries in WTO.

But with this bilateral negotiation between US and individual members of WTO, it creates uncertainty that the MFN rule under WTO may be undermined. If that happens, I think it is going to be very difficult for countries to work with one another, to predict how trade is going to be conducted in time to come. And therefore, even after Liberation Day is over, even at the end of 90 days whatever outcome that may be, the uncertainty remains that tariffs can be raised or reduced at any point in time. This will result in weakening of the global trading system, and that is going to be the new order of the day. In time to come, this will be the new landscape. That is why, this is very concerning to small and open economies like Singapore, that depends on global trade for our economy.

Our trade is three times our GDP, that is how important trade is for Singapore. Trade is also very important for many countries, including Japan, and that is something that is worrying for us. And that is, in the longer term, even after the tariffs have settled in one way or the other, the new environment will be very different, because the rules-based system will be undermined.

That is why we have Singapore has decided to set up a taskforce. This taskforce has three key missions. The first is to gather information, because things are changing all the time, every morning when they open the newspaper, there is always great news on trade and tariffs, and sometimes shocking news, and that is the first dish on your breakfast table. It is something that we are always concerned about, and therefore it is important for us in Singapore to better understand this information, share it with the businesses, and try to make sense of this information together with the businesses. That is why this taskforce’s first mission is to gather information and make sense of the information.

The second mission of this taskforce is look at immediate challenges, identifying the issues that are faced by our companies in the short-term in response to changes in tariffs in different countries. This way, we will help to prepare them to deal with that immediate impact of the tariff changes. We also work with them to see what additional support the government will need to put in place to help them weather and navigate through these very choppy waters.

But the third mission that this taskforce has to do is to take a longer-term view. As I mentioned earlier, after Liberation Day, I think it will be a new landscape that we will be facing, and how do we prepare our companies and our businesses and our economy as a whole to deal with this new landscape is something that we will need to plan for. This may happen in 5 years’, 10 years’ time, but we have to start planning today, and help companies to transform, to navigate these longer-term challenges.

It is not just the companies, we also need to prepare our workers, our workforce, so that they have the necessary skills for the economies of the future. That is why we have introduced a scheme called SkillsFuture Credit to help companies and workers to train for the future. This is something that this taskforce will be looking at.

So, three issues: one, information sharing, to makes sense; secondly, immediate, short-term impact solutions; and thirdly, plan for the long-term. So these are the three key missions of this taskforce. And we work together with not just within the Government, but also with businesses, private sector, and the trade unions looking after the workers. Therefore the taskforce is a tripartite taskforce, Government, public sector and the workforce representatives through the union. I think this is a whole-of-Singapore approach to tackling this crisis.

Moderator:  My last question is on collaboration with Japan. Could you elaborate on what role you expect the Japanese government and Japanese companies to play in Asia?

DPM Gan:  I think Japan can play a very important role in Asia's growth and development. Economically, I think Japan has technology, Japan has a strong economy, and has very strong enterprises. In fact, Japan played a very significant role in Singapore's development and growth, particularly in the early days. When Singapore started industrialisation in the early 70s, after we gained our independence, we want[ed] to grow our economy, grow our investments, grow our jobs for our people, and Japanese companies had confidence in Singapore in these early days and invested significantly in Singapore, growing many of our industries and training the Singaporean workers. So, Japan has contributed to the development goals of Singapore's economy. [Moving) forward, we continue to see opportunities for the Japanese businesses to invest in Singapore, because Singapore is still a growing hub for Asia, and is a gateway for the rest of Southeast Asia. [So] we continue to encourage Japan to invest in Singapore's economy.

Beyond just economics, we are also working very closely with Japan on climate change and looking at alternative solutions for energy needs, whether it is hydrogen, ammonia and other carbon solutions, such as carbon capture and storage. These are technologies that Japan is developing, and we are very keen to cooperate with Japan in this area. We are also looking at developing new initiatives, particularly in connection with the celebration of [our] 60th anniversary next year. We are discussing how we can come together and explore cooperation in tourism, cooperation in trade, investment, cooperation in the green economy as well as the digital economy.

But beyond economics and investments and trade, there is also a role for Japan to play in ensuring and contributing to the stability and security of the Southeast Asian region. We also have a lot of defence cooperation between Singapore and Japan, and the region with Japan, so we encourage Japan to lean forward in helping to ensure and support the security and stability of the Southeast Asian region, as well as growing the Southeast Asian economy.

So there are a lot of opportunities that we can work together between Singapore and Japan, ASEAN and Japan. Singapore and Japan are partners in many areas. We are partners in the CPTPP, we are partners in the RCEP, we are also partners in the Indo-Pacific Economic Framework for Prosperity during the Biden administration.

We have many areas that we will work [on] together. One particular area [in which] we work very well with Japan is in the JSI on E-Commerce that I mentioned earlier. There were three co-conveners of this JSI – Singapore, Japan and Australia. So we have worked very closely with Japan, pushing ahead on this JSI on E-Commerce, and we look forward to continue working with Japan; in particular, pushing ahead with this support for a rules-based multilateral trading systems.

DPM Gan:  Thank you for your compliment on Singapore's economy. At the end of the day, if you look at Singapore's economy, our per capita income GDP may be high, but overall, Singapore is still a very small economy. If you look at Japan, the total size of your economy is very significant, and therefore, do not underestimate the potential of the Japanese economy to grow. The Japanese economy has always been very innovative. That is something that Singapore has always wanted to learn from Japan, how to continue to have an innovative economy. These are areas [in which] we can work together.

Japan has also a lot of start-ups. I think this is something that we want to find a way to work together on, because we want to encourage Japanese start-ups to come to Singapore, to set up operations in Singapore, because the whole of Asia is your market and Singapore is the best gateway to the rest of Asia, because of our extensive connectivity. So, we can work together. We also encourage Singapore start-ups to come to Japan, to work with startups in Japan, to tap into the technology that Japan may be able to offer and see how we can work together.

I think there are many opportunities for Japan and Singapore to work together. So do not underestimate the capability of the Japanese economy, the innovativeness of your people and the productivity of your workers. There are many, many things that we actually look up to Japan [for] and want to learn from Japan. One area that we have been trying to encourage our companies to do, is to also go out of Singapore to develop an external wing of investments outside Singapore, because Singapore's economy itself is very small and we do want our companies to be global in nature, or at least start regional, and eventually become global companies. Japanese companies, many of them are already global companies. I think this is something that we also are very keen to see how can we help our companies regionalise and globalise. These are things that we can learn from Japan too.

For me, many years ago, I was also sent to Japan to learn about Japanese technology. That time I was in a steel-making company in Singapore. I came to Japan to be attached to a steel mill to understand how Japan managed steel production, which is very different from what we do in Singapore. When I went back, we revamped our production system, our management system, and learning from Japan how to be disciplined, how to ensure high productivity in our shop floor. All these are the things that I think Japan can contribute, not only to Singapore, but to the rest of the world.

Moderator:  DPM Gan, thank you very much.