�DEEPENING ECONOMIC ENGAGEMENT BETWEEN

ASIA AND THE MIDDLE EAST�

Your Excellencies

Distinguished guests

Ladies and Gentlemen

It is my pleasure to address you this afternoon.  It is heartening to see so many here today supporting this event, especially our Asian neighbours and friends from the Middle East.  Let me welcome you to Singapore.

Asia-Middle East Economic links

1.              This event sets the stage for a rekindling of old ties between the Middle East and Asia.  Tradesmen from Arabia, Persia, and other parts of the Middle East have traded with the merchants from Asia in the past.  Where we once traded in spices, porcelain and silk, today we trade in ideas, business, and innovation.  In recent history, economic relations between the Middle East and Asia have been dominated by oil.  Apart from oil, economic links between Asia and the Middle East have not been strong.  But this is changing. 

Middle East as a Rapidly Growing Economy

2.              The Middle East economies have experienced exceptional growth in recent years, growing at an average of 5% for the past three years.  Qatar experienced a growth of 8.2% last year while Iran�s economy grew by 5.9% in the same year.  For 2005, the IMF estimates that the region will grow by a further 5%.  Economic growth in the region is thus strong.

3.              With a combined GDP of US$1 trillion, the Middle East is fast becoming a region of growth and opportunity.  Change is swift.  Many Middle East economies are moving towards developing their markets, and expanding their economic space through international trade.  Countries like Bahrain, Egypt, Jordan, Kuwait, Oman, Qatar and the UAE are already members of the World Trade Organisation, while other countries like Saudi Arabia are in the process of WTO accession.  In addition, many Middle East economies are starting to realise that it is important to diversify away from their oil-based economies.  Many have started to devote time and resources to build infrastructure in order to become plugged into world markets.  Kuwait for instance has embarked on a US$300 million expansion of its airport and Qatar is investing some US$100 billion to develop its infrastructure over the next 10 years.  In fact, not only is Qatar developing its hardware, it is also investing funds in its �software� development.  During my visit to Qatar last month, I was impressed by Qatar�s commitment to building up their future generations through their Education City.  The signs are clear � the Middle East offers new and exciting opportunities.  Singapore businesses that have already ventured into the Middle East have come back with good feedback.

4.              In this context, Singapore has reviewed our policy on the Middle East and has given the region greater importance and priority, stepping up on bilateral contacts to explore and facilitate economic cooperation.  Recent visits by Senior Minister Goh Chok Tong and other Singapore Ministers to countries in the Middle East are part of this new effort.

5.              For Singapore, the Middle East ranked as our 6th largest trading region[1] in 2004.  Overall trade is on the increase, from S$24.3 billion in 2003 to S$32.2 billion in 2004.  This is more than double the volume of trade  a decade ago.  Thus, the Middle East as a region is already one of Singapore�s more important trading partners.  We hope to strengthen this relationship further.

Deepening Economic Engagement

6.              Along with its diversification strategy, many Middle East economies are now expanding their economic ties with Asia.  In recent years, we have seen growth in non-oil trade, investments, tourism, and finance to and from the Middle East.  The Middle East economies are increasingly looking east and Asian economies are moving to engage the Middle East.

7.              But you may ask, why engage Asia?  Just as the winds of change are blowing through the Middle East, Asia is undergoing a transformation too.  Trade and investment flows in Asia are dynamic.  Asia will be a large and important market in this century.  China is growing at 8 to 10% per year.  India is targeting to grow at 7 to 9% per year.   ASEAN is growing at 5 to 6% per year.  The middle classes in these economies number not in the millions but in the hundreds of millions.  And they are increasing by the tens of millions every year.  Asia is today the fastest growing region in the world, growing at a rate that is more than double the global rate.  Its combined GDP is projected to exceed that of the US or the EU within a generation.  With a combined market of nearly 3 billion in China, India and Southeast Asia, Asia will be a thriving region of growth.

8.              There are also softer and more intangible aspects of Asia as an economic partner.  By this I refer to the cultural commonalities we share.  The Middle East is not culturally homogeneous.  Neither is Asia.  .  But both regions are culturally close nonetheless, especially given our time-honoured traditions of communal ties and togetherness.  We value similar things.  In the Middle East, �wasta�, which means connections, is an important aspect of business deals.  In Asia, it is called �guanxi�.  People from the Middle East are known to be warm and generous.  In Asia, we believe in mutual respect and cooperation.  This sets the stage for a fruitful partnership.  I say �partnership� because we believe in working in partnership with you, not in competition with you.

Economic Partnerships

9.              We believe that economic partnerships such as Free Trade Agreements are effective in increasing trade and investment.  FTAs also serve as strategic bridges between different regions.  They have a positive impact on the bilateral relationship over and above the economic benefits, as they tend to promote more exchanges between the governments and peoples on both sides, thereby anchoring ties.  In Singapore, we have concluded several FTAs with both Middle East and Asian countries.  Our FTA with Jordan was our first with a Middle East country and Jordan�s first with an Asian country.  Negotiations with Qatar have been substantially concluded recently.   Negotiations with Kuwait and other Middle East countries are currently underway.  Within the region, we embarked on lowering tariffs within ASEAN since 1992.  Our FTA with Japan was our first bilateral FTA with an Asian country, while our negotiations with Korea are substantially concluded.  We also have ongoing ASEAN FTAs with some countries in the region.  Through these FTAs, we removed tariffs, opened markets, and enhanced links.  But more than that, through these FTAs, we have gained an understanding of each other�s economic interests and needs, and we have learnt the need to give and take with our partners.  This will in turn facilitate a greater level of trust and trade between our partners.

10.           FTAs are but one mode of cooperation.  Our two regions can also engage in broader economic partnerships.  Singapore and Qatar for instance have embarked on a bilateral cooperation programme called �Qatar-Singapore Connect�, where the principle of engagement is founded on a symbiotic relationship between partners, in which Singapore can play a constructive role in Qatar�s development plans just as Qatar can use Singapore as the base for its  strategic engagement with Asia.    We are currently looking into more partnerships with other Middle East countries.

Building Understanding and Trust

11.           Along with building up effective economic partnerships between us, we need to build up mutual understanding and trust.  This goes hand-in-hand with any partnership, whether people-to-people, country-to-country, or region-to-region.  Many Middle East countries face a lot of negative media reporting.  The stereotypical  image of the Middle East is one of instability and insecurity, which is distorted, imbalanced, and not encouraging to investors.  This does not apply to the Middle East alone.  Many Asian countries face the same negative publicity too.  This is a challenge we must overcome.  When I visited Iran in April, what I saw was a country rich with natural resources and cultural heritage, and whose people are eager to improve their economy and develop their country.  Importantly we must ask, what do Asians think of the Middle East?  And what does the Middle East think of Asia?  Singapore businesses have in the past avoided the Middle East for two main reasons � ignorance and fear.  Ignorance of the vast opportunities there and fear of violence  and insecurity.  This lack of awareness and operational knowledge of the Middle East and Asia is a challenge to greater engagement.  We have to facilitate greater contact and communication to gain a better level of mutual understanding and respect.  We will need to increase dialogue and interaction between our regions.  We will need to cultivate familiarity and build up trust between us.  These are fundamental bridges that will help deepen our economic relations.  Events such as the Asia-Middle East Dialogue are a promising start to the process of mutual exchange and understanding.

Conclusion

12.           My friends, we are at a unique point in history.  We are given the opportunity and potential to strengthen Asia-Middle East partnerships.  Now is the right time to build trust in each other, and engage each other, and for both our economies to grow together.

13.           Both our regions in the coming years will be regions of growth.  Together we stand at the hub of a world trading system.  And the more open that world trading system is, the bigger it is, the more we will benefit from our position in its hub.

14.           I encourage everyone here to make full use of the panel discussions in this event.  Know the Middle East better.  To our Middle East friends, take this opportunity to know Asia better.  Let us cultivate this Asia-Middle East relationship together.

15.           I wish you a very pleasant and fruitful session ahead.  Thank you.