Keynote speech by Deputy Prime Minister and Coordinating Minister for Economic Policies Heng Swee Keat at the Opening Ceremony of the Singapore Maritime Week on 4 April 2022.
SMS Chee Hong Tat
Ladies and gentlemen
A very good morning. Thank you for inviting me to deliver this lecture at the opening of the Singapore Maritime Week.
I last spoke to some of you at the Global Maritime Forum towards the end of 2019. That occasion seems like a lifetime away.
The seas were already choppy then. The global trading system was under stress from trade frictions. The sector was grappling with overcapacity while having to make additional investments to comply with IMO 2020 sulphur emissions cap.
None of us could have expected the COVID-19 storm that would hit us. The pandemic turned the world as we knew it upside down, and precipitated the largest economic crisis in a century.
Thankfully, the maritime sector persevered, continuing to move goods and essential supplies around the world, keeping the world economy going.
Just as we were hoping to exit the storm with the receding of the Omicron wave, another one struck – the Russian invasion of Ukraine. The dark clouds are only just gathering.
The Ukraine crisis will put the brakes on global recovery. Oil prices are at an all-time high, adding pressure to global inflation and increasing the risk of stagflation.
With the civil airspace over Ukraine closed, some flights have been cancelled while those still operating are taking longer routes. Companies are also avoiding the China-Europe rail lines which run through Russia. The reduced air and rail cargo capacity, and the resulting higher costs, have put a greater strain on shipping.
The armed conflict has also disrupted shipping. More than a hundred ships are stuck in ports in the Black Sea, with several damaged due to the conflict. With Russia and Ukraine accounting for 15% of the global seafaring workforce, there could potentially be manpower disruptions to the maritime sector.
Even if military action in Ukraine ceases, the invasion has irreversibly accelerated the tectonic shifts in geopolitics.
So, it is in this context that we are gathering today – with one storm receding behind us, and a new one clouding the horizon.
In these stormy seas, there are many preoccupations and urgent tasks to deal with.
But one key reason to be optimistic is that the fundamentals of the shipping industry remain strong.
Shipping remains the most cost and carbon efficient mode of transportation. Despite the pandemic, global trade hit a record high last year, with over 80% of the trade volume carried by sea.
Despite the current uncertainty, the medium-term outlook for the global maritime industry is good. But to realise this potential, we must deal with the challenges and opportunities.
In the spirit of the theme of this year’s Singapore Maritime Week – “Transformation for Growth”, let me suggest three key areas of transformation that the sector must focus on. I will illustrate each with a statistic.
The first statistic is that global container shipping rates increased more than four times in 2021, compared to pre-COVID-19 levels.
The storm has lifted the maritime industry, providing much needed reprieve after the struggle for profitability in recent years.
In the near term, this is positive for ports and shipping lines. But this will not last, and we should not expect it to. Persistently high rates will dampen trade and undermine the lifeblood of the global economy.
Shipping capacity is stretched now. New capacity is coming on stream over the next few years. Herein lies the risk – that excessive investment in shipbuilding now could eventually lead to another capacity glut, which we saw after the Global Financial Crisis.
The shipping industry is highly-cyclical, prone to “boom and bust”. Large swings in shipping rates not only create huge uncertainty for trade and economies, but is also disruptive for attracting and growing the maritime sector.
It is inherently difficult to eliminate economic cycles of all forms, including the shipping cycle. But we can moderate the cycle, by having greater awareness of this risk, and working together to adopt a discipline of measured and continuous investment.
The second statistic is that on average in 2021, the reliability of vessels arriving at ports on time has more than halved to around 35%, from around 78% before the pandemic.
This is partly due to the disruptions to manpower and logistics brought on by COVID-19, and lower investment in capacities in the down-cycle years.
But stripping away the cyclical and COVID effects, the statistic also shines the spotlight on the potential for us to significantly improve the efficiency of entire supply chains, and capacity to adapt to evolving circumstances.
There is even greater impetus to do so as the maritime industry will need to adjust to the reconfiguration of global trade flows and supply chains.
The major enabler is digitalisation. Digitalisation can enable the better tracking and optimisation of the flow of goods. Going digital can also reduce the voluminous paperwork, which often requires the same information fields.
The third statistic is that the maritime sector has to reduce absolute greenhouse gas emission by 50% by 2050, compared to 2008 levels.
If the last two years seemed like a lifetime, thirty years may seem like eternity. But it’s not that distant a future. Thirty years is only one ship generation away.
The global maritime industry should build on the strong momentum of IMO 2020 to further accelerate your transition to a greener future.
Some had touted IMO 2020 as the Y2K of shipping, but I am glad that the industry managed to make a seamless transition to using very low sulphur fuel oil.
There are also many promising innovations that can reduce carbon emissions, and there is no better time than now to accelerate your transition to a greener future.
Singapore’s Contribution to Global Maritime Transformation
Continuous maritime investment. Digitalisation for efficiency. Decisive green transition. These are three key areas that the global maritime industry must focus on. As a global maritime hub, Singapore seeks to contribute to these transformation efforts. Let me elaborate.
The first area is on continuous maritime investment. In Singapore, we are fortunate to have a close-knit maritime community. As a small island state, the entire nation is like an extended port and international maritime centre, all integrated into one.
As part of a nation-wide economic transformation effort, we launched the Sea Transport Industry Transformation Map in 2018, bringing together all the stakeholders in the maritime community to effect change.
You have just heard from Minister Iswaran about the three essentials of transformation for the sector. Indeed, this collective approach has made good progress in the past five years – with good productivity growth, an increase in the number of good jobs, and stronger linkages and synergies across the economy.
We are seeing the fruits of industry transformation, through innovation and the use of technology such as in additive manufacturing. For example, Wilhelmsen and thyssenkrupp set up a joint venture in Singapore to provide 3D printed parts for vessel maintenance. The JV has printed and delivered more than 800 replacement parts to date.
Today, I am happy to announce the launch of the refreshed Sea Transport Sector Industry Transformation Map for 2025, which sets out the collective course for the next few years with an emphasis on innovation, human capital development, and resilience.
Our key ambitions include developing Tuas Port into the largest fully automated container terminal port in the world; expanding the international maritime centre ecosystem here; nurturing the MarineTech start-up ecosystem; and creating 1,000 additional good local jobs.
To strengthen the translation from ideas to action, we will also be setting up a Maritime Industry Tripartite Transformation Committee, comprising our businesses, unions, and government agencies to oversee implementation.
Digitalisation for Efficiency
The second area is digitalisation. In 2019, I launched digitalPORT@SG as a maritime single window for the clearance of vessels and crew entering Singapore.
Since then, digitalPORT has saved 100,000 man-hours each year in Singapore. But given the global nature of trade, right from the start, we aimed for this digitalisation initiative to be operable across the world, to enable industry players to reap greater efficiency.
In 2020, we went beyond digitalPORT to embark on digitalOCEANS, an initiative to harmonise data standards to achieve ship-port data exchange interoperability. PSA International and five other international partners are working together on this project, and we welcome more to come on board.
This morning, we are taking this digitalisation effort one step further with the development of OCEANS-X. OCEANS-X is an API marketplace to facilitate data exchange, that will enable us to scale digitalisation more easily and quickly.
When two parties seek to link their systems for data sharing, an API will need to be developed. Each time an additional party joins, a new API is potentially needed.
This approach is not only onerous, but the proliferation of APIs adds to the complexity of systems over time. With the OCEANS-X API marketplace, parties can search through the list of standard APIs for maritime datasets to see whether an existing one meets their needs, in which case there is no necessity to develop a new one.
Streamlining the APIs used will further improve efficiency. For example, the port clearance API, which companies can use to directly link their systems to digitalPORT, can save up to 100,000 additional man hours of processing time annually, on top of the savings already achieved.
Beyond port clearances, OCEANS-X can further strengthen digital connectivity between port authorities, terminal operators, shipping lines, logistics service providers and government agencies as well as other digital eco-systems such as SGTraDex. This digital backbone can in-turn accelerate innovation in MarineTech and other areas.
I welcome all of you to join this digitalisation effort.
Decisive green transition
The third area is in making a decisive green transition.
We launched the Maritime Singapore Decarbonisation Blueprint last month. It has ambitious goals, which include making our ports net zero and reducing harbour craft emissions significantly by 2050. The Blueprint was developed after in-depth consultations with industry, and recognises the need to green every segment of the supply chain – from our vessels, to our port and marine bunkering infrastructure.
While the maritime green transition is a global effort, Singapore seeks to make a contribution.
For example, we set up the Global Centre for Maritime Decarbonisation, bringing together industry partners, researchers, and MPA to drive R&D and to pilot novel decarbonisation solutions. The founding of the Centre was made possible through an initial $120 million contribution from government and six like-minded industry partners.
A second example is the Coastal Sustainability Alliance, a partnership to support the electrification of Singapore’s harbour crafts by jointly investing in a network of charging points for electric boats.
Yet another example is the Clydebank Declaration for Green Shipping Corridors. Minister Iswaran announced earlier that Singapore will be joining this initiative, together with 22 other signatory states.
We are only 30 years, or one ship generation, away from the global maritime emissions target set by IMO. With more than 100,000 merchant vessels plying our seas today, many will have to be replaced in the coming decades. Likewise, significant complementary changes on the port-side infrastructure will be needed.
As a global financial centre, some 20 international banks based here have ship finance portfolios. Singapore also has a pool of venture capital, private equity and alternative investment players here.
We are looking to build a green ship financing ecosystem, and develop a suite of financing options to enable the green transition.
In the coming years, the maritime sector will also need to undergo a fuel transition, from today’s marine fuels to cleaner fuels.
Singapore, Japan, and the Port of Rotterdam Authority have also formed the Future Fuel Port Network to develop a roadmap on the adoption of cleaner marine fuels.
We are also a member of the Castor Initiative, a multinational coalition across the entire maritime ecosystem, that aims to design, build, and commission the world’s first ammonia-fuelled tanker by 2025.
I welcome all of you to work with us on this journey towards a greener future.
Let me conclude.
Although the global maritime industry is cyclical and facing challenges, we are approaching the future from a position of strength. The fundamentals for growth in the medium term are strong, despite the short-term headwinds.
We must make the best use of this strength to transform, if we are to realise the growth potential. The industry will need to focus on three critical areas of transformation – continuous investment to mitigate the highly-cyclical nature of the industry, digitalisation to improve the efficiency and adaptive capacity of the supply chain, and making a decisive green transition.
Given the global nature of the maritime industry, the maritime community should work together to address these issues. Singapore will do our part to contribute to the global efforts. I thank our international partners for your continued support, and we look forward to working with you to transform our sea transport sector and strengthen the global maritime commons.
On this note, I wish you an enriching conference ahead. Thank you.
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