FTAs are vital for Singapore's survival, says Ong Ye Kung

Health Minister Ong Ye Kung, drawing on his experience as a trade negotiator, yesterday rebutted allegations that free trade pacts, specifically the Comprehensive Economic Cooperation Agreement (Ceca) with India, were detrimental to Singapore’s interests. Here is an edited version of his ministerial statement.

File photo of then Prime Minister Goh Chok Tong meeting a visiting team of Indian entrepreneurs and members of the Confederation of Indian Industry at the Istana on Oct 2, 2005.PHOTO: LIANHE ZAOBAO

Mr Speaker Sir,

I am delivering this ministerial statement for two purposes.

First, even before the General Election last July, the PSP (Progress Singapore Party) had repeatedly alleged that the Comprehensive Economic Cooperation Agreement (Ceca) between Singapore and India allows professionals from India "a free hand", to come and work in Singapore.

In his social media post on June 22, 2021, Mr Leong Mun Wai again said that "the most important economic policies that have affected the jobs and livelihoods of Singaporeans relate to foreign PMETs and free trade agreements, in particular Ceca."

These statements are false. They have been repeated for too long. I was a trade negotiator at MTI when I was a civil servant. We worked closely on several of our FTAs. I worked with a very dedicated team, who has over two decades fought hard for the interest of Singapore, to expand our economic and political space of our small island state. I feel I owe a duty to correct the falsehoods.

Indeed, Singaporean PMEs, like PMEs in other advanced economies, are facing challenges. Many have given us their feedback, and the Government has been taking steps to address their concerns.

But our FTAs in general, and Ceca in particular, are not the cause of the challenges our PMEs face; if anything, they are part of the solution.

FTAs and Ceca have been made political scapegoats, to discredit the policy of the PAP Government.

The second reason to deliver this ministerial statement is to put into context, on behalf of MOM and MTI, the parliamentary questions that have been posed to the ministries concerning foreign PMETs, FTAs and Ceca.

Several of the questions were filed by PSP's two NCMPs, to gather data for a subsequent debate on a motion they intend to file. Where we can, we will provide relevant data to equip all parties for that subsequent debate.

How we got here

Let me first recapitulate how we got here.

As I mentioned, for months now, the PSP has alleged that FTAs and Ceca have led to the unfettered inflow of Indian professionals, displacing Singaporeans from their jobs, and bringing about all kinds of social ills.

This is a seductively simplistic argument that workers facing challenges at their workplaces can identify with, and has stirred up a lot of emotions. Ceca-themed websites have sprouted, filled with quite disturbing xenophobic views about Indian immigrants.

Words gradually became deeds, and toxic views turned into verbal and physical assaults on Indians, including our citizens. It is sad that serious issues concerning the economic well-being of our country and workers have descended to this.

That is why the Minister for Law called out such xenophobic behaviour during the May sitting of this House, and challenged the PSP to table a motion on Ceca, so that the matter could receive a proper public airing.

The PSP has since made a public statement on the matter, standing by its views on FTAs and Ceca. It filed various parliamentary questions requesting more data and information.

I will talk about the following:

One, what is fundamental to Singapore's ability to earn a living and survive;

Two, why FTAs, including Ceca, advance our interest, and are not the cause of the challenges faced by workers; and

Three, what then are the causes of Singaporeans' concerns and how do we address them?

Singapore needs to embrace globalisation

Let me start with the first question - what is fundamental to our economic survival. Simply put, we are too small to survive on our own, and we need to tap into global markets to earn a living, and be self-reliant.

What do we have to start with? We have no natural resources, but we have one precious natural endowment, and that is our geographical location. It is a lasting advantage, but one which requires us to work very hard to realise and sustain. If we succeed, it helps compensate for our lack of size.

That is what we have done. By capturing the trade flows through the straits of Malacca and Singapore, PSA became the largest container transhipment port in the world. It is a unique interchange in the world, connecting East and West, Europe, Middle East, India and China. The port is central to the growth of the maritime industry, responsible for 160,000 jobs in Singapore today.

In addition to our seaport, we have also grown into an aviation node. Before Covid-19 hit us, Changi was one of the busiest airports in the world - and it shall be so again - though in aviation terms our geographical location is not quite ideal. We made it happen, with a renowned Changi and SIA experience. Before Covid-19 struck, the aviation-related industry here supported 190,000 jobs.

With these global connections to the world, we built up the manufacturing sector, about one-fifth of our GDP today. We obviously don't manufacture just for Singapore - we are too small; but we are manufacturing for the world. Manufacturing supports another 440,000 jobs today.

Our exports also include trade in services. One growing services sector is the financial services. Today, almost every major global financial services institution is in Singapore, carrying out a range of activities including new ones such as fintech and green finance. The financial services sector employs over 170,000 people.

We are also becoming a centre for technology, research and development. Many global tech firms - Faang (Facebook, Amazon, Apple, Netflix, Google), BAT and many more - are in Singapore, making Singapore their regional or global innovation centres or engineering hubs. Today, around 50,000 international companies operate out of Singapore, 750 of them have made Singapore their regional headquarters.

None of these would have happened without a clear strategy, implemented well. It was a long and painstaking process, part of the story of our island nation. Clean government, rule of law, safety (you can walk on the streets at any time of the day), political stability, good infrastructure, high standards of education, openness to the world - all this, and more, come together to make us a good place to invest.

I should emphasise that another big plus point for us is the quality of the Singaporean workforce. Our people are well known to be well-educated, diligent, responsible, trustworthy, and we get things done. We have one problem - that there are too few of us, of Singaporeans - a point which I will come back to later.

On top of all these plus points, we have built a network of 26 FTAs including with the US, China, EU, Japan, Asean, India, South Korea, Australia, New Zealand, etc - all our major markets and they are all our FTA partners.

This brings me to the next topic, why FTAs, including Ceca, are important to Singapore. It is in Singapore's interest to pursue FTAs.

We started our FTA strategy in the late 1990s. We thought through it carefully and executed before other countries did. It has given us a very precious early mover advantage, and greatly boosted our efforts to export, attract investments, venture overseas, and create good jobs for Singaporeans.

Our total trade in goods and services is three times our GDP. Since 2005, our total trade has nearly doubled from around $890 billion to $1.5 trillion.

Today, when EDB goes out and persuades investors to come to Singapore, our network of FTAs is always a major selling point.

FTAs are especially important to our SMEs. They free them from being constrained by our small domestic market, and give them access to global markets. Our SMEs are sending all kinds of Singapore-made products overseas, from canned food, barbecued pork and frozen roti prata to medical devices, machines, components and chemicals.

FTAs are also spurring our companies to venture abroad. Our investments overseas increased nearly five times, from $200 billion in 2005 to over $930 billion in 2019. When our companies grow overseas, they become stronger, and also employ more Singaporeans here.

If we accept the basic reality that Singapore needs the world to earn a living, then we would realise the fundamental importance of all our FTAs. They are a keystone of the economic super-structure we have built. We could not have advanced the welfare of Singaporeans to the degree we have without FTAs.

We cannot take all this for granted. We recently fell in the 2021 IMD world competitiveness ranking from 1st place to 5th. Among the components evaluated, we continue to do well in areas such as government efficiency and economic competitiveness. However, we lost ground in terms of our openness towards global talent and trade.

I hope this is temporary, due to the effects of Covid-19. Overall, we are still holding our own in terms of foreign investments. In 2020, even as 45 companies ceased operating their regional or global headquarters in Singapore, over 130 companies set up such headquarters here.

When you attack FTAs, and worse if your attack succeeds, you are undermining the fundamentals of our existence, of the way we earn a living, all the sectors FTAs are supporting, and the hundreds of thousands of Singaporean jobs created in these sectors.

As the attacks on FTAs, especially Ceca, have been very specific, let me explain how an FTA works. To prepare for this statement, I had to dig up my old negotiating notes and do quite a bit of revision!

An FTA's key disciplines:

It requires a country to remove or lower tariffs on substantially all trade between FTA partners. This is of tremendous benefit to Singapore, because while other countries customarily impose tariffs on thousands of items, we are already very open, imposing duties on only three alcohol products - beer, stout and samsu. Hence, any FTA that substantially removes tariffs imposed by both parties is inherently beneficial to Singapore.

FTAs also require governments to accord protection to foreign investments and ensure that regulations are imposed fairly and equally on both local and foreign firms. They also set standards on the protection of intellectual property.

Singapore always protects foreign investments and applies our regulations fairly. This makes us attractive to foreign investors. Abiding to these principles

and disciplines is not a problem to us at all.

In fact, as more of our companies expand overseas and create their own products, they too hope that Singapore can negotiate similar protection for them when they go overseas. The investment and intellectual property protection disciplines in FTAs are therefore important assurances for our companies.

Newer FTAs also set certain environmental and labour standards. Not every country supports such disciplines, but Singapore believes that they reflect contemporary concerns relating to free trade and investments.

Specifically, on Ceca, this FTA with India benefits Singapore in many ways. Signed in 2005, it was India's first comprehensive bilateral FTA with any country. Ceca gave Singapore a strategic first-mover advantage in India, just when it was taking off to be an economic powerhouse.

Ceca reduces tariff barriers, which made Singapore goods more competitive in the Indian market. Partly because of that, bilateral trade between Singapore and India has grown by over 80 per cent, from $20 billion when Ceca came into force in 2005, to $38 billion in 2019.

Similarly, Singapore's direct investment abroad in India grew by nearly 50 times, from $1.3 billion to $61 billion during the same period.

In 2019, 660 companies from Singapore had investments in India, almost double the number (nearly 370) a decade ago. As these companies grow regionally, they hire more people back home too. In 2019, they employed 97,000 locals.

Despite these significant benefits, FTAs are controversial in many countries. As a trade negotiator I have listened to the sensitivities of many of our partners.

Some countries wished to protect certain sectors, such as agriculture, which Singapore does not do. Others could not live up to, say, the transparency standards of government procurement or intellectual property protection. Still others are concerned about the influences of foreign culture through the arts and entertainment industry.

The toughest job of the negotiator is to identify these sensitive areas and find ways to protect or address them.

In our jargon, we call the protections "exceptions" or "carve-outs". When we have a big carve-out, with strong protection in sensitive areas, we will say "this carve-out allows a jumbo jet to fly through!".

In some sensitive areas it is easy to negotiate exceptions or carve-outs, because everyone agrees. One example is right of taxation. Another is national security. A third one is immigration.

Every country holds the view that there cannot be unfettered movement of people across borders. That would create social unrest and a public uproar. Governments must retain the ability to impose immigration and border controls, and FTAs cannot undermine that.

Hence, in all FTAs and WTO agreements, you will find that immigration powers are strongly and prominently preserved and protected. You can find such standard clauses in the WTO Agreement, as well as in all our FTAs, including Ceca.

As so many falsehoods have been said about the immigration-related parts of Ceca, let me set out in some detail what is really in the agreement.

Immigration matters are set out in Chapter 9 of Ceca - Movement of Natural Persons. The legal text is available online, so I will only detail the salient points:

One, the chapter makes it clear that the Government's ability to regulate immigration and foreign manpower is not affected by the Agreement. The Government retains full rights to decide who can enter the country to live, work or become PRs or citizens.

This is set out clearly in two clauses. They are standard clauses, commonly found in all FTAs. They are the second and third paragraphs of Chapter 9 of Ceca:

  • Clause 9.1.2: This Chapter shall not apply to measures pertaining to citizenship, permanent residence, or employment on a permanent basis.
  • Clause 9.1.3: Nothing contained in this Chapter shall prevent a Party from applying measures to regulate the entry or temporary stay of natural persons of the other Party in its territory, including measures necessary to protect the integrity of its territory and to ensure the orderly movement of natural persons across its borders…

Two, the obligations relating to movement of natural persons in Ceca, as in all FTAs, are not broad principles with wide applications, but highly specific.

What are these broad principles that you can find in FTAs? One broad principle is national treatment. It is found in some chapters of FTAs, like trade in services or investments. This means you cannot discriminate against foreign service providers and investors. So, regulations and benefits that apply to local firms must apply evenly to foreign-owned ones.

If immigration had not been carved out, and if the national treatment principle had been incorporated into the Chapter 9 of Ceca, then indeed, Indian workers would have been treated like Singaporeans, and would have had free rein to come to live and work in Singapore.

This is what the PSP claims. Except that there is a strong immigration carve-out, and national treatment is not found in this chapter of Ceca, nor any other corresponding chapter in the FTAs that Singapore has entered into.

Mr Speaker Sir, I emphasise and underline and highlight this: nothing in the agreement implies Singapore must unconditionally let in PMEs from India. Contrary to PSP's claim, our ability to impose requirements for immigration and work pass has never been in question in Ceca or any other FTA that we have signed.

Instead, the obligation that Chapter 9 imposes on the parties is to process applications for temporary entry with some expedition, and a certain transparency, such as informing applicants of the outcomes and not leaving them in suspense.

We also have to accord a certain duration for the validity of the permits. But this is subject to the applications meeting our prevailing work pass conditions.

Such a commitment on duration is not something unique to Ceca, because similar commitments exist in other FTAs and are found in the WTO Agreement, signed by 164 members, including Singapore.

Many parties to FTAs also commit not to impose labour market tests. This is a common clause in our FTAs, including with India, Australia, China and the US.

It means we do not insist that companies go through onerous processes and documentation to prove that no suitable locals will take a job, before they can hire a foreigner. Companies in Singapore, or any other place, do not hire in this way. The common and best practice is to interview the suitable candidates, consider them all fairly, and make a judgment on the best person. These are all market-friendly, widely adopted, reasonable obligations.

Let me also specifically address two aspects of the chapter on movement of natural persons in Ceca, that have been singled out for criticism.

First, the PSP pointed out that Ceca listed 127 categories of professionals, hence claimed that Indian nationals in these professions can all freely come here to work here for one year. This is false, because as I explained earlier, all foreign PMEs have to meet our work pass conditions in order to work here.

The listing shows the types of Indian professionals who may apply to work in Singapore. (It) does not mean we must approve them. India for its own reasons requested such a list, similar to what they have in their FTAs with Korea and Japan. In fact, even if they had not listed the professions, their PMEs could still submit work pass applications to work here.

This is in fact how other FTAs work: with or without listing of professions, nationals from our FTA partners are not precluded from submitting work pass applications, which will be evaluated based on our prevailing criteria and work pass conditions.

Thus the point being made by PSP on the list of 127 professions is a red herring - the list does not confer any free pass on any Indian nationals.

Second, there have been complaints that intra-corporate transferees from India can also freely enter Singapore to work. Based on my explanation on how the chapter works, this again is not true. Intra-corporate transferees also have to meet our work pass qualifying criteria.

In any case, the total number of intra-corporate transferees from all over the world, and not just India, that have come to Singapore to work is very small. In 2020, there were only about 500 intra-corporate transferees from India in Singapore - less than 0.3 per cent of all EP holders.

So, Mr Speaker Sir, I hope we can put a stop to all this misinformation about our FTAs in general, and Ceca in particular.

The real challenges

Nevertheless, it is important that we need to recognise that PMEs in Singapore do face challenges.

I see three challenges at least.

First, there is more competition from foreign PMEs. The number of EP holders has increased, from 65,000 in 2005 to 177,000 in 2020 - an increase over 15 years of 112,000, or an annual growth rate of just under 7 per cent.

Over this period, the increase in number of local PMEs is much higher, by over 380,000. These numbers underline an important point: that competition between foreign and local PMEs is not a zero-sum game.