Speech by Mr Edwin Tong, SC, Senior Minister of State for Law and Health, at the 2020 International Roundtable Symposium on Cross-Border Investment and M&A, 15 January 2020

15 JAN 2020

15 Jan 2020 Posted in [Speeches]

Introduction

  1. Good morning, everyone.

  2. Thank you very much for having me this morning at the International Roundtable Symposium on Cross-Border Investment and M&A. This is the first time that the symposium is being held in Singapore, and my first time attending as well. I used to be one amongst you, a member of the Bar, before I joined the Government and now I look at issues from the other side of the equation. But my experience in private practice has been useful. I spent almost 25 years at Allen & Gledhill. That experience – together with how we look at shaping legal services, what we want to achieve from the laws that we pass in Singapore – have all been very useful.

  3. Today’s symposium is a rare opportunity for us to come together. Many of you in this room are thought leaders in this area, driving the M&A practice, and adding value to the spectrum of services across the sector. A little contrary to what Peter1 and Arnoud2 said, I think there is still a big role for globalisation. Indeed, globalisation drives transboundary M&A activity. In today’s context, it would be very difficult to undertake large M&A work without increased globalisation, and high amount of transboundary, cross-border jurisdiction activity.

  1. From my perspective now at the ministry, and having some years of practice, we look at legal services as a service – a service that drives the economy, and that drives businesses, support the economy. When our Government looks at laws and the legislation, we take a pro-business and pro-user perspective. We cannot focus on every area in Singapore, so we have to consider the key areas we want to drive, what are the key high-yield and high-value areas we can focus on?
  1. Second, what do we do in terms of legislation? How does legislation help businesses? We are going to set up infrastructure here for a number of things, including conflict management and resolution, which in Singapore we regard as central to the protection of investments. We know that without that, without having a strong, transparent, impartial and highly respected conflict management system, there is not going to be much confidence in the jurisdiction. We know that, and we place a lot of emphasis on it. I am going to share with you some examples of what we have done, but the central theme underpinning all of this, is a strong regard for the rule of law. To look at everything from the perspective of transparency and fairness, to put the cards on the table so when investors come into Singapore, they know what the score is, they know what the rules are, and when something goes wrong with the investment, they know how that is going to be resolved.

Asia

  1. Let me start by making some remarks about the context of where we are today in Asia and Singapore’s role in this ecosystem. Yes, there has been decreasing globalisation. It is manifested in the politics we see, also by the policies that we see in the world. The trade wars are a manifestation of many of those inward looking features as well. But I would argue that Asia, whilst not immune to this tension, there is much to be optimistic about. Let me share some numbers with you.
  1. Asia is estimated to account for 50% of global GDP by 2050. Each year, in the next 30 years or so, you will see that the number will increase, so there is an upward trajectory that is very strong.
  1. As a region, Asia is the world’s largest recipient of foreign direct investment (FDI), capturing about 40% of global flows today. Likewise, as we move towards 50% of GDP in the world, we can expect that the FDI will grow.
  1. In terms of M&A activity, since the depths of 2008, post-Lehman, there has been robust growth year-on-year. Asia-Pacific today accounts for 32% of global M&A by volume, and about 23%, just shy of a quarter, by value.
  1. There is a special place in Asia for this, and in particular in Singapore: our geographical location being the entry point into Southeast Asia, close to large markets like China and India. We have a unique position in Singapore.
  1. We look at opportunities for Singapore as being any one of three modalities. Either you do activity in Singapore, or from Singapore, or through Singapore. We are very happy to facilitate any of the investments, any of the touchpoints along the way.
  1. Today’s topic is “Lessons from Singapore” but I do not venture to be the expert in this, especially with the talent and experience in this room. So it is not so much lessons that I will share with you, but rather our perspectives on how we manage and what we have done over the years to get there.
  1. We have been fortunate because of our strong foundation from many years ago, building on rule of law, that today we are a home to many large MNCs, and the regional HQs of MNCs. If you look briefly at the numbers, 46% of Asia’s regional headquarters are located in Singapore across a very diverse range of economic activity. We see in particular, 59% of tech MNCs’ Asia regional headquarters located in Singapore. That number has been growing and we expect that to grow. We are a choice destination for both inbound as well as outbound foreign investments, contributed to more than 50% of Southeast Asia’s inbound and outbound investments in 2018.
  1. In terms of M&A activity, Refinitiv reported that activity involving Singapore increased 57% year-on-year to a high of US$116 billion in 2019. Singapore also has been the most targeted nation in terms of investments, in Southeast Asia. Singapore as a country and jurisdiction contributed to more than 40% of Southeast Asia’s total M&A activity. We have a deal value that reached US$45 billion last year. That was almost double from the year before.
  1. My point here is not so much to boast about the numbers but to say that there is activity coming into Singapore, and there remains a lot more optimism despite the fact that there is an increasing trend of looking inwards and introspectively elsewhere in the world.
  1. I mentioned at the outset that we focus on a few key areas, given Singapore’s limitations – we are limited in natural resources, in physical space – but we do have a talented manpower base, a strong, well-educated labour force. We take advantage of that by focusing on areas such as IP, infrastructure, Fintech, and of course, professional services. Those are where we regard investments as being high in value, and of course also higher in yield.
  1. We look at laws, regulations, whether by legislation or otherwise, to support the entire value chain of financial advisors, consultants, legal advisors, accounting firms, bankers and the like, to support the community. We ensure that the relevant rules, regulations are in place, so that the business users ultimately have as many options as possible available to them.
  1. Some examples of what we have done – our IP laws. We believe IP is going to be increasingly important. If you just take a survey of the Fortune 500 companies, there are less and less brick and mortar companies in that list, and more and more intangible assets, that are valued on the Fortune 500 list. Hence we constantly upgrade our laws here. We have a very comprehensive Copyright Act operating now. We do not tolerate breaches of IP easily. But even with that, as the world shifts and we move into a more high-tech arena, we have to look at protecting different types of assets that are often intangible, we are now also looking at revamping the Copyright Act, quite substantively in the course of the next one year or so to look at how we can protect these new areas. We do that because we know that if we want our biotech industries to prosper, if we want the top technology firms to be in Singapore, then the regime has to be enhanced, modernized and probably contextualised for users here.
  1. We take a very serious view on transparency. If you look at the indices on transparency, anti-corruption, bribery – we take a very no nonsense, zero tolerance view. Why? Because earlier as I mentioned at the outset, investors must know what they come in for, they must know what system it is that they operate in.

Dispute Resolution

  1. This allows me now to segue into what I said at the outset on dispute resolution. If you come into the investment, one expects that there will be conflicts, that there will be issues to resolve. How we resolve these disputes, is to us, the key driver behind optimism in Singapore’s dispute resolution framework.
  1. Over the years, we have focused on a few key broad principles. The first is to ensure that we deliver quality jurisprudence in an open, transparent manner. Whether you choose to litigate your case, bring it to arbitration, or increasingly as I will mention later on, choose mediation as an option, we want the system to be open, transparent, and most importantly, pro-user. If you want your business conflicts to be resolved by arbitration because you want confidentiality, you want to ensure that the best arbitrator relevant for the industry is available, then you get your pick.
  1. While we set up the Singapore International Arbitration Centre (SIAC), and we look at SIAC as a Singapore centre, we also ensure that there is nothing “Singaporean” about the way we choose arbitrators, in the way we manage cases. Because ultimately, if you make it very parochial and Singapore-centric, you lose the advantages of having an international centre, built upon strong credentials and having first class facilities as well as first class arbitrators. All of these positives will come to nothing if we look at it in a very parochial fashion.
  1. SIAC has had a growing number of cases over the years. It has been recognised as the centre of choice in Asia. Many foreign investors coming into this region in Asia see SIAC as an option for impartial, neutral, and objective resolution of their disputes. Singapore is now ranked the most preferred seat for arbitration in Asia, and also the third most preferred seat in the world after the international powerhouses. SIAC itself has seen year-on-year increases in caseload and what was interesting about the numbers over the last few years is that the growth in the number of cases coming to SIAC doors where neither party have anything to do with Singapore – not a Singapore party, and in many cases too, the project concerned does not even occur in Singapore. So the ‘from’ or ‘through’ or ‘in’ Singapore doesn’t quite apply to these cases, but we take these cases on because we recognise that there is a broader role that SIAC can play, and has to play.
  1. If parties choose international litigation, we have set up the Singapore International Commercial Court (SICC) five years ago. Using our experiences from SIAC, we made sure that the judges at SICC are first-rate, come from a broad spectrum of jurisdictions and from different backgrounds – civil law, common law, from Asia, from elsewhere in the world. This ensures that when parties have disputes, the best judges can be put forth to them to resolve these cases.
  1. Finally, Singapore International Mediation Centre (SIMC) for mediation has been a bit of a topic of the day, because of the Singapore Convention on Mediation that was signed last year. We hosted 70 countries and 46 countries signed up to the Convention on Mediation. I would like to make the point that whilst countries, businesses are a lot more inward looking, the fact that 46 countries signed up to the Convention on Mediation on the first day, is a sign that mediation is a very recognised way of resolving cross-border disputes. What could not be done prior to the Convention on Mediation, was the ability to enforce cross-border mediated settlement agreements; that changes with the Convention.
  1. As you know, domestic mediation is often faster, cheaper and helps to preserve the parties’ relationship. Now that the Convention has been extended onto the global stage, we can now enforce cross-border mediated settlements, in a manner that we could not do before. Signatories on the first day include the US, China, Korea, and half of ASEAN. That is a sign that parties see this as an option and a viable way to resolve conflicts.

Restructuring

  1. Before I sit down and pass the time to Boon Chye3, I would like to mention that one of the other advantages that we have in Singapore, is the close collaboration between the Bench, the Bar and the Government. We work very closely in tandem.
  1. An example that I would like to share with you is a time when we had to react to decreasing oil prices, decreasing bunker and charter rates that affected the economy in around 2015. Many Singapore companies that were otherwise fundamentally strong, faced challenges in that period. We knew that we have to react very quickly. We got together, consulted with the industry, and decided very quickly to revamp the insolvency rules on this. In a short measure of time in 2017, we set up and passed in Parliament the amendments to the Insolvency Act. Well, it is now called the Insolvency Act, but previously it was parked under the Companies Act.
  1. Adopting the best practices of the US Chapter 11 which allows for debtor in possession, allows control, and also allows for distressed debt financing, with super-priority financing and so on, helps to bring up these companies and rehabilitate them. We put in these rules very quickly, practically overnight, so that they can use them. I must say that the experience that we have seen, since 2017, many companies have been rehabilitated on the back of these rules.

Conclusion

  1. In summary, when we look at the Singapore experience, it is really a combination of ensuring that the playing field is level for anyone coming into Singapore. It is ensuring that the legislation, rules and regulations are pro-business and pro-users, and showing that conflicts are resolved in a fair, open and transparent manner, with the best jurisprudence we can find anywhere in the world. Finally, it is to be facilitative, to listen to the audience, to the needs of the business community. We often consult with lawyers, with the stakeholders and the Bar, before legislation is made. It is a combination of these factors that has helped us to where we are.
  1. One other point I would make is – conference like this is an opportunity to share and express your views. No one has a monopoly over all the good ideas. All the talent is in here, I hope that with the Chatham House Rule, there can be more open conversations, because we can learn from each other, whether you operate in Asia, Europe or Americas, we can share experience and learn from each other. I think that ultimately is the foundation for increased globalization, which helps multijurisdictional transboundary transactions. Thank you very much.

1. Professor Peter Williamson, Professor of International Management, Cambridge Judge Business School↩

2. Professor Arnoud De Meyer, University Professor and Former President, Singapore Management University↩

3. Mr Loh Boon Chye, Chief Executive Officer, Singapore Exchange↩

Last updated on 15 Jan 2020