Excerpts of Post-Belt and Road Forum for International Cooperation Wrap-Up Interview with Minister Lawrence Wong in Beijing on 16 May 2017

Minister: We see the Belt and Road as potentially the world’s largest platform for regional cooperation and integration. It will provide a boost to trade, connectivity and infrastructure development. From Singapore’s point of view, the message that I have been giving to the Chinese leaders and other partners whom we have met here at the Belt and Road Forum is that Singapore supports the Belt and Road, and we stand ready to work with China and other countries to help build the Belt and Road.

We think we can add value in several ways. Firstly, on the financial side, there are tremendous needs for the financing of projects. No single country can fully finance the infrastructure projects on the Belt and Road, not even the multilateral banks. So you really need to bring in private capital and commercial financing, and Singapore is a financing centre and we can play a useful role.

In fact, if you look at the projects in ASEAN, already 60 per cent of these projects have their financing done though Singapore, and that is because we have one of the highest concentration of project finance in Asia.

The second way we can play a useful role is in infrastructure and urban planning, because many countries along the Belt and Road, particularly in Southeast Asia, are going through rapid urbanisation and they are looking for expertise to help them in the process. This can be a complex process – if not done properly, it can be very expensive because you end up duplicating things, or putting in investments that cannot yield results.

So countries understand that if this is not done well, or if you do not prepare early enough, rural poverty can lead to urban poverty. Countries are looking for assistance and many of them have come to Singapore to study what has been our experience in 50 years of very rapid modernisation. We are happy to share our experience, and we can help other countries develop their own urban masterplans, and then help them successfully implement infrastructure projects to meet their own needs.

Thirdly, we see scope for Singaporean companies to work with Chinese companies as they go out, because China is encouraging its companies to go out of China as part of the Belt and Road initiative, and at the same time, we are also encouraging our companies to internationalise.

In this recent Budget, we gave a further push with more incentives and more assistance to help our companies go regional. We think that there is a lot of scope for Singaporean and Chinese companies to come together. We have complementary strengths. The Chinese companies in areas like utilities, transport, rail, infrastructure, are larger, and have the resources. But if they embark on projects within Southeast Asia, they may not have the local knowledge, they may not have all the areas of expertise that they need, whereas Singaporean companies may be more familiar with the local conditions, they have the business network, they have the abilities to manage these projects. I think the combination of China and Singaporean companies coming together in third markets, particularly in Southeast Asia, can be another area of cooperation.

These are some areas which we think Singapore can be relevant, can add value to the Belt and Road, and we will continue to work with China and other countries on these different areas of cooperation.

Qn: Singapore also signed an MOU regarding the Belt and Road, could you give us more details on the MOU?

Minister: The MOU covers areas that I mentioned earlier – financial cooperation, infrastructure, companies coming together to work in third markets, and it also includes our project in Chongqing.

The project we have in Chongqing is an important priority platform to demonstrate and operationalise the Belt and Road initiative. Both sides are now working on this Southern Transport Corridor as you all are familiar with – it links Chongqing with Beibuwan in Guangxi. Chongqing is tied to the Belt which goes to Central Asia and Europe, and Beibuwan, Guangxi is tied to the Maritime Silk Road. If we connect the two – Chongqing to Beibuwan – we can then effectively connect the Belt and Road. That would make the Belt and Road much more effectively; it would enhance connectivity and it would add benefits to many people in the region.

Qn: Could you give us your impression of your attendance at the Forum? What is your sense seeing the discussions going on – the atmosphere, the international cooperation?

Minister: Clearly, it is a very important forum for China. Like I mentioned earlier, it is a very major platform, not only for China, but for cooperation for the whole world. There was very active participation, and a lot of interest from countries to get involved in the Belt and Road projects, particularly the developing countries that have huge infrastructure needs.

China is pushing the Belt and Road to advance trade and connectivity. So, there’s tremendous interest in countries to be involved in the Belt and Road initiative in order to accelerate their infrastructure projects. If you look at the participation at the Forum, it is very wide-spread – there are African countries, Middle-Eastern countries, Central Asian countries. Many of these countries certainly hope to benefit from the Belt and Road initiative.

Qn: When the concept was brought up in 2013, some countries had scepticism. From the Forum, did you sense more confidence in the concept?

Minister: This is a vision that will take a long time to be fully realised, but over the last few years since the Belt and Road initiative was mooted, you have seen more resources being put on the table, you have seen actual projects being realised. As more and more of these come into play, people will see that it’s not just talk, it’s action, it’s concrete, it’s tangible results.

But as I have mentioned earlier, this is not something that can be done by China alone. China has mooted the initiative, and President Xi has said very clearly that it’s not a Chinese platform, but an international platform for cooperation. And financing as he said too, is the key. He mentioned that finance is the lifeblood of modern economy, and financing is the key to ensuring the success of the Belt and Road initiative. To ensure successful financing of the projects, it is important that these projects are done on a commercial basis, that you attract private capital so that you make more funding available to the projects.

So we must find ways to manage the risks that are inherent in these projects, because they are complex. If you have a rail project, it may cut across different jurisdictions; if there is a change of government, then what happens; if there is a termination by any one party, what happens? What are the termination clauses? How do you allocate risks under these circumstances?

These are not trivial issues. It is precisely this type of complexity that makes it difficult for these projects to get financing. Through the Belt and Road initiative, we can work through some of these operational issues. I think it will help bring down the risks involved in these infrastructure projects. The more we can do that, the more we can attract private capital, and that will lead to more projects been funded.

Qn: A lot of these big infrastructure projects, because of all the risks that you have mentioned, it is very hard for private entities to want to be part of it, therefore governments and multilateral banks have to come in to fund these projects. Trying to get the commercial sector to be involved, how realistic is it?

Minister: We can take incremental steps towards making it happen, and it is already happening now. You have multilateral banks, like the World Bank, that have been very active in doing this.

What they have done is work out mechanisms to de-risk projects, for example, through a first-loss guarantee. They work with different parties, they work with governments, and they provide a guarantee. If there is a loss, if there is a breach or non-payment, then they are the ones who guarantee the first loss. Because it’s the World Bank behind it, the governments are also very cautious, because they know if they default on payment, it’s not just this project at stake, there can be many other World Bank loans at stake.

So the World Bank does its due diligence, and crowds in private sector funding for such projects. It is already happening at that level, and I think that’s one good way which we can start make things happen.

That’s why for the Belt and Road, the Chinese have said they are very keen to work with multilateral banks, including the World Bank and the Asian Infrastructure Investment Bank (AIIB). The AIIB has just started, it’s fairly new, it’s got seven or nine projects so far, but it hopes to expand its portfolio, and it’s certainly looking to see how it can do more in project preparation, project structuring, and work with different parties to help de-risk the projects.

I believe with the World Bank and AIIB’s involvement, you can see more of these happening over time. We are keen to work with the multilateral banks. We have the World Bank office in Singapore – their infrastructure hub is based in Singapore. We have been talking to the AIIB to see what more we can do together. Within Singapore itself, we hope we can provide, as I have said, a financial and infrastructure hub, not just for the commercial banks, but also for the multilateral banks.

Qn: Singapore companies are known to be very realistic, some countries may be afraid of the Belt and Road projects, worrying that there are strategical and political considerations. Do you think that when Chinese companies tie up with Singaporean companies, it is a stamp to say that it is commercially viable and put a stake in it?

Minister: I can’t speak for Chinese companies what their considerations are. Our own companies will look at the rate-of-return, they will look at risks, they will make their own considerations.

For us, our basis of operation is very clear, the government will provide the framework; we will even provide facilitation and link-up, but companies make their own decisions. The companies ought to be able to make their own calculations, if they want to go into a project, go in with their eyes open, understand who their partners are, and make their calculations of risk and returns and see if that’s something they would want to do.

This is already happening. We see more and more Singaporean companies going overseas – on power projects, utilities projects, water, infrastructure, etc. If there’s scope to partner with Chinese companies, and I think there is, we will encourage them to do so.

Qn: Could you say something about Singapore having this international arbitration centre, and whether we can provide arbitration services for companies in dispute.

Minister: This is another key part which I mentioned, besides finance, that will enable us to serve as an infrastructure exchange. The fact is that we have a whole range of professional services which includes dispute resolution, legal advisory, and arbitration. Precisely because infrastructure projects are so complex, a key is the arbitration mechanism when there are disputes. So the arbitration centre we have in Singapore will help play a useful role. The legal services will help, the dispute resolution services we have in Singapore will help. All of that we have as a comprehensive suite of solutions in Singapore. That’s why we can be the exchange where different parts of the infrastructure value chain come together, and the projects and deals can be done through Singapore – because the financing can be done through Singapore, the solutions can be done in Singapore, and the legal and arbitration and dispute resolution mechanism can be settled out of Singapore.

Qn: How do we then promote ourselves? Are there any challenges in trying to convince partners of the Belt and Road to use Singapore as an exchange?

Minister: How do we make ourselves relevant? This is a continuing challenge. We shouldn’t be complacent; we shouldn’t assume that everybody will come to Singapore naturally.

There’s no reason why they need to. They can go to Hong Kong; they may even do it out of China over time. We shouldn’t assume just because we are in a good position today that all these will come automatically.

Our imperative for Singapore, for the government and the companies, is to work hard and make ourselves more attractive and relevant. And this is what we have been doing all this while.

In the 1980s, after the Plaza Accord when the Japanese investment came out of Japan and invested in Southeast Asia, we worked hard to attract them – to make ourselves relevant and make ourselves a good base for them to locate their manufacturing bases and Southeast Asian branches.

So likewise, when Chinese companies go out of China as part of the Belt and Road initiative, we have to make ourselves attractive to outbound Chinese investments.

We are doing a credible job now, it’s not as though we are irrelevant, because if you look at Chinese outbound investments in the Belt and Road, the (PRC) Ministry of Commerce statistics shows that we are getting about 30 per cent of that – not because we have infrastructure projects in Singapore, but because these are investments coming to Singapore and then eventually being channelled to third countries in Asia, because we are a relevant financial centre.

So, we are not doing too badly. But we shouldn’t be complacent either. 30 per cent can come down if we are complacent, and other competing hubs emerge to take the business away from us. We have to work hard, on the financial side, on the professional services side, on the infrastructure side as well as to attract Chinese companies to use Singapore as a base. That’s something the government will have to do, and we will encourage Singaporean companies themselves to see how they can add value as partners to the Chinese companies.

Qn: Are there any Singaporean companies at the Forum?

Minister: Yes, there are. They already have partnerships with Chinese companies. Our infrastructure players, our utilities players can benefit, and many of them already have Chinese partnerships and we encourage them to continue to strengthen these partnerships. The key to doing that is to be relevant – our companies need to work hard and be more innovative, to add value and show that they can offer good value propositions to Chinese companies when they come together in partnership.

Qn: Could you talk about the competition as other parts of the world get developed into transportation hub, infrastructure hub which used to be the advantage of Singapore?

Minister: We shouldn’t be afraid of the competition. We should take it in our stride. Singapore could have very well failed, if we had not put certain things right. But we were able to overcome the difficulties throughout our history. That should give us the confidence that we can face the competition ahead in the future. We shouldn’t be afraid of it; we should be confident of our own abilities and of our own resourcefulness and innovativeness. Already if you look at our plans, we are putting in significant additional investment to expand our airport and sea port. We are doubling our airport, literally building another Changi Airport; we are doubling the capacity of our sea port; and this will make our two ports – sea and air ports, much more relevant in the future.

We are making Singapore not just an air and sea hub, but also a digital hub. If you look at the future, digital data will be the new asset. People liken it to new oil. Just as we are an oil hub even though we have no oil resources, in the future we want to be a data hub, a digital hub. That’s why we are also putting in infrastructure to enhance our ICT infrastructure – our links to other countries through submarine cables, and our own internal infrastructure for a Smart Nation.

We are not standing still and we cannot afford to stand still. There is competition. But we should take it in our stride, we should be confident, we should continue all of these efforts to ensure that we are able to have a secure future ahead of us. Many of these things have been discussed by the Committee on the Future Economy (CFE), and we are now following through on the recommendations.