Below is the transcript of a CNBC Exclusive interview with Singapore's Minister for Trade and Industry Chan Chun Sing. The interview was first broadcast on CNBC's Squawk Box Asia on 2 September 2019. If you choose to use anything, please attribute to CNBC, Nancy Hungerford and Sri Jegarajah.
Nancy Hungerford (NH): I'm pleased to say we are joined by Chan Chun Sing who is Singapore's Minister for Trade and Industry and he joins us around the desk for an exclusive interview ahead of the ASEAN economic ministers meeting in Bangkok. Sir, it is a pleasure to have you with us today. Thank you for your time ahead of this important meeting in Bangkok where no doubt the attendees will be discussing the very latest between the trade talks with the US and China. How concerned are you at this point given what seems to be a prolonged state here of this conflict and just what does it mean for Singapore's economy going forward?
Chan Chun Sing (CCS): I think the fundamental question that everyone is asking is not just for the next couple of months but over the next couple of decades is will the world become more integrated or will the world fragment into different trading blocs? I think that's what worries most people. If you look at it over the last couple of decades I think millions have been lifted out of poverty because of the integration of the global economy. It allows everyone to optimize their production processes, their supply chains, their distribution network at a global level. And that is what has brought us this level of prosperity. But I think now everyone is really worried about whether the world will be fragmented where all of us will have to sub-optimize at the regional if not at the local level. And I think that's the fundamental question that is being posed to everyone.
Sri Jegarajah (SJ): Do you fear now Minister that we have now entered an era of de-globalization?
CCS: There are threats on that front. If you look at the current account deficit that people feel very upset about. I think there are forces pushing back against this. And the fundamental reason is that many countries are unable to help their businesses and their workers to adapt and adjust to the new global economy. And then you have a local pushback with global consequences. So that's what worry us. But on the other hand I think we can take some pride that we are still pressing on to integrate the global economy especially on the new digital front. That is the new frontier for us to really integrate our production processes of supply chains to bring our economy to the next higher plane.
NH: When you talk about the pains facing globalization I mean what does that mean for you and your role as trade minister for Singapore which has benefited so enormously from globalization. I mean we've already seen some of the impacts show up in the trade data and trade going to China has declined. Of course things like electronics hurting as well. Have we seen the worst of it?
CCS: I think for us in Singapore we prefer to focus on the long term, the long term fundamentals. On one hand, we are continuing to diversify our portfolio of trade making sure that we have more trade agreements, more substantive trade agreements with the existing partners and new partners. And that will help us to de-risk the entire economy. On the other hand I think instead of just focusing on the short term white water rafting as we call it, it is more important to look at the long term fundamentals of how Singapore position ourself. What is our investment pipeline looking like? And I think for those reasons I think we are quietly confident. If we look at the first half of this year just the EDB investment alone we have exceeded our expectations. And it's not just a quantity of investment but also the quality of investment. This excludes the two significant investment by the integrated resorts. So overall we are happy with what we have and a kind of investment that's coming into Singapore are long term plays. They are those with a high intellectual property content that cannot be easily displace. They come to Singapore because of our superior connectivity not just in the air, land, and sea dimensions but also in the data, the financial dimensions. And I think people want a safe harbor amidst times of uncertainties. And this is where Singapore plays to our strength not just in terms of the rules and regulations but progressive rules and regulations that keep pace with the needs of the businesses and also our protection of the intellectual property.
SJ: So this is all very prudent economic policy and prudent economic planning and your future proofing the Singaporean economy. But in the here and now, Minister is this challenging external picture consistent with recession in Singapore?
CCS: At this point in time, we are not looking at that but of course there are many external factors that can still impact the second half numbers. But what we are doing is to make sure that we double down our effort to help our industries restructure. In fact, I think the urgency for the industry is to restructure to build real capabilities is there. So I think we are very happy when we talk to our businesses and workers. I think they share the same perspective that we must double down and accelerate the pace of a transition. So we are not going for broad based pump priming measures in general but we are spending our resources making sure that we built specific niche capabilities for our companies and our workers. And I think those factors will put us in good stead in time to come.
NH: When you spoke briefly about this idea of fragmentation and the real concern there is at the moment I mean one area this plays out in this technology and we've seen a lot of this discussion around 5G, the threat of a splinternet. And I'm wondering as a key trading partner both the US and China. Do you encounter any pressure coming from the United States not to use the walkway in the 5G roll out here? Would they consider that a potential hurdle when it comes to the trading partnership.
CCS: So there's two parts of this. One, on the digital front, indeed we are working with like minded countries like Australia and Japan to co-host to lead the WTO initiative on e-commerce. We want to uplift the standards for e-commerce and provide a level playing field for this new economy. So we also have a digital Economic Partnership Agreement spearheaded with Chile and New Zealand. So all of these are various bilateral and multilateral measures that we want to put in place for the new economy based on digital. So that is progressing well. On the other hand, when it comes to the 5G I think the US and our other partner countries know that we take our security and network resilience very seriously and we have shared with them how we intend to do this.
SJ: Minister how closely are you monitoring developments in Hong Kong?
CCS: We are watching the developments very closely because whatever happens in Hong Kong will have an impact beyond Hong Kong and certainly in this part of the world and in a current climate where we have so many uncertainties from the U.S.-China trade spat to Brexit, the Japan and Korea trip spat, definitely Hong Kong would be something on the horizon in terms of the number of uncertainties that we have to deal with.
SJ: And given the global challenges is there even more urgency now to conclude RCEP? I know that's going to be amongst the subject matter at this ASEAN summit in Bangkok just how confident are you that an RCEP agreement can be finalized before the year is out?
CCS: Certainly I think there is greater impetus now than ever before in our previous meeting in Beijing the last round. I think everyone agreed at the RCEP at this point in time it's not just the economic agreement. It has gone beyond that. It is a strategic signal to the world's economy on what countries in this part of the world believe in. So we are in the final stages of the negotiation and there will be some tough trade off required. But I think with a bit of a political commitment from all side, we can probably just cross the finishing line sometime by the end of this year if not the early part of next year. We'll be able to look forward to some good news.
NH: Minister as we do keep a close eye on the situation in Hong Kong of course we all wish them very well and what they've had to face. It's been challenging times. Do you think though that you may see some business diverted to Singapore here as a result?
CCS: I think the businesses are always reallocating their resources and making sure that they minimise the risk to their entire portfolio. So they are constantly juggling those risks. There might be some coming over but I think it's we are not just looking at the numbers but we are also looking at the type of investments that we are able to attract. So pretty much like what I mentioned the EDB numbers earlier is not just the quantity that we are concerned with, actually we are more concerned with the quality. We want investment that are coming here because they value our safe harbor status, they value our intellectual property protection regime and so forth. So it's a quality of investments that we are most interested in beyond just the quantity.
SJ: Minister if we can circle back to RCEP. Can you give me an idea of the issues that are dividing the potential membership right now and how confident are you that the Bangkok summit will be a platform to narrow those differences?
CCS: I think RCEP is a very ambitious trade agreement. So there are certainly new grounds to be broken and for example in the protection of intellectual property on e-commerce. So these are new issues. I wouldn't say that it is an obstacle but it is something that many countries would have to grapple with because there's something new to them on the issues of data flows and so forth. For ASEAN and the respective ASEAN countries and the respective RCEP countries and non ASEAN RCEP countries, actually they already have the bilateral free trade agreements. So the greatest beneficiary for this RCEP would not just be an ASEAN and the six other countries but also between the six other countries and amongst themselves.
NH: How would you describe the mood in terms of these negotiations and really among countries who are now taking notice of what is almost a global movement to look after your own country more. I mean do you think there has been a reluctance to come to an agreement here because people are saying well wait a minute if relationships are breaking down on trade and so many corners of the world as you've already alluded to are people now withdrawing and saying we need to put more emphasis on what my country needs first?
CCS: No I don't think so. From what I have seen from my colleagues around the other 15 countries, I think everyone is determined to make sure that we send that signal. I mean of course there are local domestic issues that they will need to grapple with. But I think the unique thing about this grouping of 16 is that everyone wants to help each other to cross the finishing line because our attitude is this if you have a domestic issue that you think you need to overcome then let's talk about it and see how the other 15 can help you cross the finishing line because we will need to do various trade off. We'll need to do various give and takes in order to get everyone across the finishing line. So I think that sense of camaraderie the sense of solidarity is very valuable.
SJ: Within ASEAN yes but within the broader potential RCEP membership it's a very different story admittedly isn't it Minister because you've got India, China, South Korea and Japan which right now are not the most easiest of potential partners strategically and politically they all seem very divided right now. And what what can be done to make them come to the table and align them more closely?
CCS: Actually I mean just to use an example between Korea and Japan, we know that they have their bilateral differences. And my message to them is this bilaterally it might be very difficult for you to come to an agreement over your differences but with a multilateral platform such as this, it actually affords you another avenue to resolve some of the issues and to keep relationship on a stable keel even if you have your bilateral differences. I think this is what is appreciated by many of the other countries around the table. So even for China and India, they may not be able to conclude a bilateral agreement by themselves but through this plurilateral platform they have another opportunity to work together and that allows us if you like a balance to stabilize the relationship across the different countries.
NH: So before you go. Can I just get your thoughts on how you think the trade discussions between China and the US will play out here? Because when you meet with your counterparts from both countries do you get an indication that there is an awareness that it is in their interest to come to a deal. Do you think this will be resolved anytime soon?
CCS: I don't think that this will be resolved anytime soon because the issues that they are dealing with is not so simple. I think a lot of people talk about a U.S.-China trade conflict. I think the two phrases are not exactly right. First, it has gone beyond the U.S.-China trade conflict because it has affected different parts of the world trading the WTO system the World Trade Organization system. And we have to be very careful because there will be other people, the medium sized power that might be following suit with their own interests being put ahead of the global multilateral system. On the other hand, I think it has gone beyond a trade war because there are competition in other areas of technology currency and so forth. Now the fundamental question that both sides need to figure out is do they want a deal? I think does the US wants a deal? Does the Chinese believe that the US wants a deal or does the Chinese believe that the US is trying to fundamentally change its own economic structure and depending on what the end states they perceive to be it may or may not be so easy to get a deal. So there are long term consequences. And even if they get a deal or whatever deal that they get. I think the markets is looking beyond the deal to say that what are some of the measures that we need to take in order to prepare ourself because I think the lack of strategic trust will be the more important factor. Without the lack of strategic trust, it'll be very difficult for both sides and the rest of the world to say that we would still have one integrated global economy. Everyone will start taking actions to derisk their own economies by fragmenting their supply chain or by diversifying their supply chains in a fragmented world. And that is the most dangerous trajectory for the world's economy.
SJ: Minister. We're very grateful for your time today. Thank you very much indeed for joining us. We've been speaking to Chan Chun Sing, the Singaporean Minister for Trade and Industry. Thank you sir.
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