BACKGROUND - meti.go.jp · PDF fileb. the negotiations ... c. given that the scope of negotiations will transcend the focus of a traditional free trade agreement, the resulting

28 September 2000

In December 1999, Japan and Singapore announced theestablishment of a Joint Study Group to examine the feasibility anddesirability of establishing a free trade agreement between the twocountries.

The Joint Study Group has now completed its work andrecommends that:

a. the Prime Ministers of Japan and Singapore make a jointannouncement, at an appropriate location and timing inOctober or November 2000, that the two countries intend toenter into formal negotiations with a view to concluding aneconomic partnership agreement between them;

b. the negotiations begin at an earliest possible timing, targetingJanuary 2001, and be concluded within a reasonably shortperiod of time so as not to lose momentum; and

c. given that the scope of negotiations will transcend the focusof a traditional free trade agreement, the resultingGovernment-to-Government agreement should henceforth bereferred to as the Japan-Singapore Economic Agreement fora New Age Partnership.

On behalf of the Joint Study Group, we, the Co-chairmen, herewithsubmit our report.

Dr Makio MiyagawaDirectorDeveloping Economies Division,Economic Affairs BureauMinistry of Foreign AffairsJapan

Mr Sudesh ManiarDeputy DirectorInternational EconomicsDirectorateMinistry of Foreign AffairsSingapore

Mr Katsuhiko UmeharaDirectorRegional Cooperation Division,Economic CooperationDepartment, International TradePolicy BureauMinistry of International Trade andIndustryJapan

Mr Pang Kin KeongConsultant, TradeMinistry of Trade and IndustrySingapore

Mr Kunio MikuriyaDirectorInternational Affairs and ResearchDivision, Customs and TariffBureauMinistry of FinanceJapan

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1. On 8 December 1999, the then Prime Minister of Japan HisExcellency Keizo Obuchi and the Prime Minister of Singapore HisExcellency Goh Chok Tong decided that a joint study should beconducted to examine the feasibility and desirability of establishing a FreeTrade Agreement (FTA) between the two countries.

2. A 25-member Japan-Singapore Free Trade Agreement (JSFTA)Joint Study Group comprising government officials, prominent academicsand business leaders from Japan and Singapore, was formedsubsequently. The terms of reference of the Joint Study Group were asfollows.

a. The Joint Study Group would examine the feasibility anddesirability of establishing a FTA between Japan andSingapore.

b. The Joint Study Group would address the following issues:

i. the architecture – including the scope – of the FTA. Indiscussing the scope of the FTA, the Joint Study Groupwould examine both the traditional areas ofliberalisation of trade in goods and services and ofinvestment, as well as bilateral cooperation in otherareas, with a view towards establishing a “New-Age”FTA;

ii. the requirements that such a FTA would have to meet ifit is to be consistent with World Trade Organisation(WTO) rules;

iii. the flexibility which might be required for either countryto take into account sensitive areas and otherdifficulties including the possible exclusion of sensitiveitems in such areas as agriculture, forestry and fisherysectors; and

iv. the strategic and economic benefits that both Japanand Singapore could derive from the establishment ofsuch a FTA.

c. The Joint Study Group would meet alternately in Japan andSingapore. The host country would provide the secretariatsupport for the meetings. In between the meetings, the JointStudy Group would continue to progress the study throughcorrespondence.

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d. The Joint Study Group would complete its work within sixmonths of its first meeting. It would submit a joint report tothe Prime Ministers of both countries at the end of the study.The joint report would contain recommendations as towhether both countries should proceed to negotiate a FTA.

e. The Joint Study Group would also issue a joint publicstatement on the results of its study.

3. The Joint Study Group met five times from March to September2000. The meetings were conducted in an atmosphere of warmth andfriendship. The discussions were candid, insightful and constructive,contributing significantly to the mutual understanding of each other’seconomic policies and practices. More importantly, the Joint Study Groupmeetings have provided a forum for both countries to explore mutuallybeneficial new ways to improve existing economic linkages andintegration.

4. This report contains the salient points and conclusions of thediscussions of the Joint Study Group. Section One provides an overviewof the current global trend towards greater regional integration. The mainpart of the report, Section Two, focuses on the possible scope of a JSFTA.This is divided into 3 parts: (a) trade and investment liberalisation andfacilitation; (b) cooperation in the growth sectors of the future; and (c)consultation and dispute settlement. Section Three describes theeconomic, strategic and other benefits that Japan and Singapore canexpect to derive from a bilateral FTA. The conclusions andrecommendations of the Joint Study Group are in Section Four.

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MEMBERS OF THE JOINT STUDY GROUP

Japan Singapore

Government Officials

(1) Dr Makio MiyagawaDirectorDeveloping Economies Division,Economic Affairs BureauMinistry of Foreign Affairs

Co-chairman and coordinator

(1) Mr Ng LangDirectorDirectorate IIIMinistry of Foreign Affairs(March to June 2000)

Mr Sudesh ManiarDeputy DirectorInternational Economics DirectorateMinistry of Foreign Affairs

Co-chairman and coordinator

(2) Mr Katsuhiko UmeharaDirectorRegional Cooperation Division,Economic Cooperation Department,International Trade Policy BureauMinistry of International Trade andIndustry

Co-chairman

(2) Mr Pang Kin KeongConsultant, TradeMinistry of Trade and Industry

Co-chairman

(3) Mr Kunio MikuriyaDirectorInternational Affairs and ResearchDivisionCustoms and Tariff BureauMinistry of Finance

Co-chairman

(3) Ms Shih Siew PohExecutive DirectorInternational Relations DepartmentMonetary Authority of Singapore(March to June 2000)

Dr Lam San LingDirectorInternational Relations DepartmentMonetary Authority of Singapore

(4) Mr Toru TakahashiDirectorInternational Trade and TariffDivision, International DepartmentEconomic Affairs BureauMinistry of Agriculture, Forestry andFisheries

(4) Ms Ng Bee KimDirectorTrade Policy DivisionTrade Development Board

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Japan Singapore

(5) Mr Hajime HatanoDirectorInternational Planning DivisionTransport Policy BureauMinistry of Transport(March to July 2000)

Mr. Ryoichi SonodaDirectorInternational Planning DivisionTransport Policy BureauMinistry of Transport

(5) Mr Tang Tuck WengDirectorSea and Air Transport DivisionMinistry of Communications andInformation Technology

(6) Mr Toshiyuki YamadaDirectorInternational Cooperation Division,International Affairs DepartmentMinistry of Posts andTelecommunications(March to July 2000)

Mr. Kenji TanakaDirectorInternational Cooperation Division,International Affairs DepartmentMinistry of Posts andTelecommunications

(6) Ms Valerie D’CostaDirector, InternationalInfocomm Development Authority

(7) Mr Shuji MiyazakiDirectorSecond Economic CooperationDivision, Coordination BureauEconomic Planning Agency

(7) Ms Anna ChanDirector, PolicyPlanning DivisionEconomic Development Board

(8) Mr Masamichi KonoDirectorInternational Affairs Division,Planning and CoordinationDepartmentFinancial Services Agency

Academics

(9) Prof Motoshige ItohProfessorFaculty of EconomicsUniversity of Tokyo

(8) Prof Tan Kong YamHeadDepartment of Business Policy,Faculty of Business Administration,National University of Singapore

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Japan Singapore

(10) Prof Shujiro UrataProfessor of EconomicsSchool of Social SciencesWaseda University

(9) Mr Simon TayChairmanSingapore Institute of InternationalAffairs; andAssociate ProfessorFaculty of Law, National Universityof Singapore

(11) Prof Eiji OgawaProfessorFaculty of CommerceHitotsubashi University

(10) Dr Linda LowAssociate ProfessorDepartment of Business Policy,Faculty of Business AdministrationNational University of Singapore

Business Leaders

(12) Mr Hajime ShinoharaDeputy GovernorDeposit Insurance Corporation ofJapan

(11) Mr Ernest WongChairmanThe Association of Banks inSingapore

(13) Mr Koji HasegawaManaging DirectorToyota Motor Corporation

(12) Mr Lim How TeckDeputy Chief Executive OfficerNeptune Orient Lines

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SECTION ONE

OVERVIEW

SECTION ONE – OVERVIEW

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GROWING TREND TOWARDS REGIONAL ECONOMIC INTEGRATION

1. Regional economic integration has become a dominant feature ofthe world economic environment, particularly during the last decade. Inrecent times, it has also become more encompassing, with its coveragebroadening from border measures to include domestic regulations andinternal measures. Agreements for such integration are today fairlydiverse in nature, and include free trade agreements (FTA), customsunions, common markets and economic unions. More than 200 suchagreements have been notified to the General Agreement on Tariffs andTrade (GATT) or the WTO.1 Of these, over 130 are currently in force.2

Most WTO members are party to at least one such agreement.

2. The growing trend towards regional FTAs in Europe and theAmericas is particularly striking. The European Union (EU) has beensteadily expanding its FTA network with Central and Eastern Europe, theCaribbean and Africa, and is also forging trans-Atlantic FTAs with LatinAmerican countries such as Mexico, Chile, and the MERCOSUR. 3

Across the Atlantic, members of the North American Free TradeAgreement (NAFTA) are working with Latin America to achieveagreement on a 34-member Free Trade Area of the Americas by 2005.Meanwhile, the Latin American economies are themselves forming manyFTAs. Similar trends are evident in Central and Eastern Europe, theMiddle East, and Africa.

3. As a result of this growing trend towards regional economicintegration, preferential trade has increased from 40% of total world tradein the period 1988-1992 to 42% in the period 1993-1997.4 In the latterperiod, while the 15 EU members accounted for the highest proportion ofpreferential trade, it was Western Hemisphere trade agreements, such asNAFTA and MERCOSUR, which showed more significant growth in theshare of preferential trade, from 19% in the period 1988-1992 to 27% inthe period 1993-1997.

4. There are different motivations for the pursuit of regional economicintegration. Some countries see such agreements as strategic alliances,while others leverage on them to obtain more secure and favourableaccess to important markets. In some cases, they have also helped topromote policy reforms.

1 Source: WTO, July 2000.2 Ibid.3 Argentina, Brazil, Paraguay and Uruguay.4 Source: “Preferential and Non-preferential Trade Flows in the World”, September 1998,

staff paper WTO..


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FTA: COMPLEMENTING MULTILATERAL LIBERALISATION

5. Japan and Singapore place primary emphasis on the multilateraltrading system. The rules-based WTO is a key institution that can providea fair and predictable global trading environment for all economies.Japan and Singapore are playing active roles in on-going efforts toresolve the issues that led to the deadlock at the Seattle WTO MinisterialConference in December 1999, and to pave the way for a New Round.

6. At the same time, however, there is a need to examine alternativetracks that complement the efforts of the multilateral trading systemtowards global trade liberalisation. In the past, FTAs were regarded asprecursors to economic blocs, and therefore stumbling blocks to theGATT/WTO. These attitudes are now changing. No FTA can afford to beinward looking, because globalisation has made markets much moreinter-linked and inter-dependent. It is also increasingly recognised thatFTAs which are WTO-consistent can have a positive ratcheting effect onglobal trade liberalisation. FTAs are now seen as an essential tool ofinternational trade policy, complementing the multilateral trading system.In particular:

a. because they are easier to conclude than multilateralagreements, FTAs can serve as building blocks towardsmultilateralism, helping to sustain the momentum of globaltrade liberalisation. FTAs allow those countries willing tomove ahead of their WTO commitments to do so, thuscreating a strong incentive for the WTO to ‘catch-up’;

b. FTAs can be a testbed for new and innovative models of rulesgoverning economic activity. These can subsequently beadapted for global use. FTAs can therefore provide positivecomplementary pressure for the evolution of WTOagreements; and

c. since FTAs are formed between a small number of partnersand at a pace that is comfortable to all parties, they are aneffective means of preparing societies for greater transborderexposure at the multilateral level. They provide an importantdemonstrative effect of the benefits of trade liberalisationwithout attracting a severe backlash against liberalisation.

In short, FTAs that are WTO-consistent, covering substantially all trade ingoods and with a substantial sectoral coverage of services would lead tocompetitive liberalisation, as opposed to protectionism.


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TOWARDS A “NEW-AGE” FTA

7. Besides the growing trend towards regional economic integration,two other key forces are redefining the global political, economic andsocial landscapes – globalisation and technological progress.

8. Globalisation. We live in a world that is increasingly integratedthrough trade, investment, capital, people and information flows.

a. Growth in world trade has outstripped growth in world output.While world GDP grew by more than 6 times in real termsbetween 1950 and 2000, international trade multiplied byabout 20 times. In 1999, international trade represented 18%of the world GDP (US$31 trillion), compared to 9% in 1965.5

b. The volume of capital flows has also surged. Globalmovement of finance capital (trading of stocks, bonds,currencies and exotic instruments) has accelerated. Since1985, growth of the global flow of foreign direct investmenthas outstripped that of domestic gross fixed capital formation.The daily turnover of the foreign exchange market has risensharply from US$590 billion in April 1988 to US$1,500 billionin April 1999.6

c. Total scheduled passenger traffic on the world’s airlines grewat an annual average rate of 4.4% from 1988 to 1998. In 1998,over 2,600 billion passenger-kilometres were registered.7

d. The growth of the Internet has been staggering. In 1996, thenumber of people accessing the Internet was about 45 million.By June 2000, this figure had reached an estimated 332million.8

9. Technological progress. Rapid advances in technology, especiallyinformation and communications technology (ICT), are accelerating thepace of change in production and consumption patterns. ICT, and theInternet in particular, is today a key business enabler, and has contributedsignificantly towards a borderless global economy by removing physicaldistance as an obstacle to trade. Access to information, and the mobility 5 Source: GATT, WTO and International Monetary Fund (IMF)6 Source: Bank for International Settlements.7 Source: International Civil Aviation Organization, press release, 22 June 2000.8 Source: NUA Internet Surveys (http://www.nua.ie).


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of capital and talent have also been significantly enhanced bytechnological progress.

10. A “New Age” FTA. These key driving forces put increasingpressure on societies to re-invent and refine their economic systems tostay competitive and attractive to capital and talent. The tremendouschanges sweeping the world will compel governments to push forwardwith continuous regulatory reforms. Societies must be prepared toembrace change and need to acquire rapidly a mindset of creativity,innovation and risk-taking. Companies, too, have to be increasinglyoutward-oriented and internationally (as opposed to domestically)competitive.

11. These trends of globalisation and technological progress provide avariety of reasons for deeper economic partnerships between economies.Significant synergy and opportunities can be derived from mutualenhancement of market access. This will create a larger and seamlessmarket for our companies. The competitive pressures brought about byliberalisation will also force our societies into a more rapid pace of change,and enable us to develop faster the capabilities and competenciesrequired to thrive in a challenging future.

12. To maximise the benefits from economic integration, efforts in this“New Age” must address the new challenges that globalisation andtechnological progress have brought about. In addition to promoting tradein goods and services, we should work towards the smooth transborderflow of people, capital and information. We also have to take activemeasures to encourage innovation and competition in the integratedmarket. A “New Age” FTA should also incorporate a process of creativeexperimentation and continuous review and improvement.

13. It is against this backdrop that the Joint Study Group conducted itsmeetings to explore the possible scope of and benefits for such aneconomic partnership between Japan and Singapore. Noting that theproposed bilateral agreement transcends the focus of traditional FTAs, theJoint Study Group termed it the Japan-Singapore Economic Agreementfor a New Age Partnership (hereinafter referred to as Japan-SingaporeEconomic Partnership Agreement or “JSEPA”). The Joint Study Grouphoped that the JSEPA would provide a model framework for regionaleconomic integration in the New Age.

14. The following sections elaborate on the findings of the Joint StudyGroup.

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SECTION TWO

SCOPE OF ECONOMICPARTNERSHIP

SECTION TWO – SCOPE OF ECONOMIC PARTNERSHIP

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I. LIBERALISATION AND FACILITATION

TARIFFS

1. Many analysts believe that tariffs, functioning as a tax onimportation, distort the competitive conditions for domestic and foreigncompanies. Because of their distortionary effects on resource allocation,they may have an adverse effect on consumer welfare, and at prohibitivelevels, may even block out foreign imports altogether. However, it isnoted that in many countries, tariffs are still a source, albeit diminishing, ofgovernment revenue, and are levied to protect domestic industries fromforeign competition. Tariff elimination is a fundamental component of anyFTA, and may help to expand trade.

2. Under the Uruguay Round (UR), Japan had bound close to 100% ofits tariffs at a weighted average rate of 3.7%. Singapore, on the otherhand, had bound approximately 70% of its tariffs at rates ranging mostlyfrom 0 to 10%.

Table 1: Bound Tariff Structure by Sector1

Share of BoundItems in TotalImports (%)

Weighted AverageBound Tariffs (%)

Sector

Japan Singapore Japan SingaporeAgriculture 99.9 100.0 16.9 9.0Fish and fish products 98.0 99.7 3.9 9.9Petroleum oils 0.4 0.0 4.4 -Wood, pulp, paper andfurniture

62.5 99.2 1.1 3.0

Textiles and clothing 100.0 77.6 7.2 9.8Leather, rubber, footwear 100.0 57.2 8.3 10.0Metals 100.0 74.3 0.5 4.6Chemical and photographicsupplies

100.0 99.8 1.9 5.7

Transport equipment 100.0 4.5 0.0 8.4Non-electric machinery 100.0 78.7 0.0 4.9Electric machinery 100.0 87.1 0.1 9.2Mineral products, preciousstones and metals

100.0 26.0 0.2 9.5

1 Source: The Uruguay Round – Statistics on Tariff Concessions Given and Received, J.

Michael Finger, Merlinda D. Ingco, and Ulrich Reincke, 1996, World Bank.


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Manufactured articles notelsewhere specified

100.0 66.0 0.6 6.9

3. There is therefore scope for further tariff liberalisation under theproposed JSEPA. In this regard, the Joint Study Group agreed that Japanand Singapore could go beyond their UR tariff commitments by graduallyeliminating their tariffs and increasing the scope of the bindings, takinginto account the sensitivities of certain items.

4. The Joint Study Group further agreed on the following parametersfor future negotiations that:

a. negotiations would take into account the need to beconsistent with GATT Article XXIV:8(b) i.e. the “substantiallyall trade” criterion;

b. negotiations would address the sensitivities of items inparticular sectors through, inter alia, exceptions and/or longerliberalisation timeframes;

c. tariff concessions of both countries would be positively listedin their respective Schedules;

d. the reduction/elimination of tariffs would be implementedthrough a phased approach with immediate liberalisation formost products and a phase-in of up to 10 years for others;and

e. both countries shall endeavour, as far as possible, not tointroduce new barriers to any imports during the negotiations.

5. The Joint Study Group agreed that the JSEPA may provide for areview of the tariff commitments with the aim of accelerating the pace oftariff elimination and/or broadening the product coverage, where possible.

6. The Joint Study Group requested that Singapore take a proactiverole in ASEAN to implement CEPT-AFTA as soon as possible, and thatJapan positively and effectively support Singapore in this respect.

7. The Joint Study Group took special note of the fact that agriculture,forestry and fishery products constituted a mere 1.7% of total bilateraltrade between Japan and Singapore in 1999. 2 Japan’s imports of

2 Statistics source: Ministry of Finance, Japan. The coverage of agriculture, forestry and

fishery is defined as follows:


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agricultural products from Singapore constituted only 0.5% of Japan’stotal imports of agricultural products in 1999. Singapore’s imports ofagricultural products from Japan were a mere 0.5% of Singapore’s totalimports and just 2.0% of Singapore’s total imports of agricultural productsin 1999. 3

8. The Joint Study Group also noted that, in terms of economic value,the agricultural sector contributed 0.1% of Singapore’s GDP and about2.0% of total exports in 1999, the bulk of which were re-exports. Theshare of agriculture in Singapore’s GDP and in total exports would notincrease over time given the decline in the area of land available forfarming. Approximately 90% of Singapore’s good items are imported.The agricultural sector of Singapore is engaged manly in the production ofeggs, fish and vegetables for local consumption.

9. During the joint study, a concern was expressed from the Japaneseside on agricultural, forestry and fishery sectors. A statement was madefrom the Japanese side that it was not prepared for further tariff reductionin these sectors in the framework of the JSEPA. Singapore participantsexpressed understanding of sensitivities on items in these sectors ofJapan. In this light, the Joint Study Group agreed that, in the possibleensuing negotiations on the JSEPA, due consideration should be given tothe need to address the problems mentioned above, while ensuringconsistency with GATT Article XXIV 8: (b). The Joint Study Group hopedthat there would be a mutually satisfactory resolution of the matter duringthe possible ensuing negotiations.

RULES OF ORIGIN

10. Rules of Origin (ROO) are criteria used to determine where aproduct is made. ROO are divided into two categories: rules relating topreferential treatment and those relating to non-preferential treatment.Singapore does not apply any non-preferential ROO to imports. However,it applies preferential ROO under the ASEAN Free Trade Area (AFTA)based on the value-added criterion. Japan, on the other hand, maintains

(a) agriculture: products listed in HS 1 to 24, excluding fish, plus products listed inparagraph 1(ii), Annex 1 of the WTO Agreement on Agriculture;

(b) forestry: products listed in HS 44 and 46; and

(c) fishery: products listed in HS 1 to 24, excluding agriculture products therein.3 Statistics source: Trade development Board, Singapore. The coverage of agriculture is

defined as products classified under HS 1 to 24 excluding HS 3.


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non-preferential ROO and preferential ROO under the GeneralisedSystem of Preferences (GSP) scheme, both of which are based primarilyon the Change in Tariff Classification (CTC) criterion.

11. The Joint Study Group agreed that ROO would need to bedeveloped under the JSEPA to allow only goods of primarily Japaneseand Singapore origin to benefit from the tariff liberalisation. These rulesshould also prevent circumvention by goods from third countries.

12. At the same time, however, such rules should facilitate rather thanimpede trade. Accordingly, the rules should be clear, predictable and easyto use and administer. They should also take into account the operationalpatterns of companies in Japan and Singapore. These companies aretypically tightly integrated into an intricate supply chain networkthroughout the region. Rules of origin developed should not be so tight asto exclude these companies from benefiting from the JSEPA.

Origin-Conferment Criterion

13. The Joint Study Group examined several options:

(a) WTO Rules of Origin

14. Since 1995, the WTO Committee on Rules of Origin (CRO) hasbeen working towards a set of criteria that would clearly define the “lastsubstantial transformation” for each product line. This would allow originto be conferred on the country where this process takes place. The meritof using this set of rules for the JSEPA is that it avoids duplication.Producers would eventually only need to comply with this multilateralROO instead of the current situation of having to apply different ROO fordifferent countries on a non-preferential basis.

15. However, the CRO has yet to arrive at a complete set of multilateralrules to confer origin. Agreements have only been reached on variousproduct lines (so-called “Basket 1” decisions).4 This is because the CROexercise is highly complex and tedious, especially since each product linehas to be carefully defined and the concerns of some 135 members takenon board.

(b) Change in Tariff Classification

16. The general Change in Tariff Classification (CTC) rule considers a

4 The Harmonized Work Program at the CRO was supposed to be completed within

three years of its initiation as foreseen by the Agreement on Rules of Origin.


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product to have undergone sufficient manufacturing or processing if it fallsin a heading (within the HS nomenclature) different from the headingsapplicable to each of the materials utilised. Thus, this method permits theprecise and objective formulation of the conditions determining origin andensures the predictability of the rules. If required to produce evidence, themanufacturer would usually not have difficulty in furnishing dataestablishing that the goods do in fact satisfy the conditions.

17. Two issues need to be negotiated if the CTC rule is to be used: (a)the general principle upon which products should be conferred Japan orSingapore origin; and (b) establishing lists of exceptions. (Thepreparation of the lists of exceptions is often difficult, as ongoing work atthe WTO has shown. Moreover, such lists must be constantly updated tokeep abreast of technical developments and economic conditions. Anydescriptions of manufacturing or qualifying processes must not be undulycomplicated to ensure that manufacturers do not inadvertently classifygoods wrongly.)

(c) Value-added Criterion

18. The value-added criterion is relatively less complex to negotiate.This method involves determining the extent of the manufacturing orprocessing undergone in a country by reference to the value added to thegoods. It is simple to administer since production costs, such asmaterials, labour and overheads costs can be established fromcommercial records or documents, if available. The value-added rule alsoallows unassembled goods and goods classified in the same HS categoryas their parts (i.e. goods which do not meet the product-specificrequirements) to qualify for preferential treatment if they contain enoughJapan and/or Singapore value content.

19. However, it has been pointed out that this method may have someproblems such as lack of predictability, due to fluctuations in exchangerates and changes in input prices. With globalisation, producers havediversified their supply sources for parts and materials. This means thatthe origin of parts or materials used in the production of a good coulddiffer from time to time. Thus, it would be difficult to determine the preciseorigin of products even within the same product line of a single producer.

20. The Joint Study Group agreed that rules of origin would be asubject for future negotiations in the JSEPA. Taking into account theabove concerns, the Joint Study Group assessed that it would bedesirable to develop specific rules of origin for JSEPA on a product-by-product basis. This set of ROO could be formulated based on the WTOrules of origin, where appropriate. Japan and Singapore could start withdeveloping specific ROO on the product lines in the category of “Basket 1”


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decisions. The work could include examining the appropriateness of theCRO’s Harmonisation Work Programme (HWP) results for the purpose ofthe JSEPA. It should also take into account the future development of theHWP.

Operation

21. The Joint Study Group further agreed on the need to developoperational procedures in the implementation of JSEPA ROO. Detailswould have to be considered in the course of future negotiations.

(a) Certification

22. In order to ensure that there is no circumvention, a set of origincertification procedures would have to be established, including thoserelated to the issuing of a certificate of origin.5 There should also beprocedures for verification, transhipment, cooperation and disputesettlement in instances of doubt.

(b) Review Mechanism

23. The Joint Study Group endorsed the establishment of a reviewmechanism under the JSEPA to regularly update the ROO. This wouldensure that future technological and economic developments, as well asamendments to the Harmonised System, would be reflected in the JSEPAROO.

(c) Advance Ruling

24. For the purpose of trade facilitation and to ensure the transparencyand predictability of the ROO, the JSEPA should allow companies toapply for and secure advance rulings.

5 Currently, Singapore manufacturers seeking preferential treatment are required to

undergo a stringent authentication process:

Stage 1 – The authorising agency, TDB, conducts visits to the factory to verify if theprocesses carried out qualify under the negotiated terms of preferential ROO. Thecompany will be eligible to claim preferential treatment as a Singapore manufacturer ifthis criterion is met.

Stage 2 – The manufacturer is required to submit a Cost Statement proving that theproduct has attained the local content requirement as negotiated under a preferentialagreement. Only then will Singapore origin be conferred upon the product.

Stage 3 – TDB will issue an Authorised Certificate of Origin for products that qualify asSingapore origin under the preferential ROO. This Authorised Certification of Origin isrequired to accompany products claiming preferential treatment.


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CUSTOMS AND OTHER TRADE-RELATED PROCEDURES

25. Noting the importance of consistent, transparent, accountable andsimplified customs procedures in the promotion of bilateral trade betweenJapan and Singapore, the Joint Study Group urged the two Governmentsto put priority on realising the simplification of customs clearance andrelated procedures. The Joint Study Group also suggested that thefollowing measures could be taken under the JSEPA.

Risk Management

26. Both Singapore Customs & Excise Department (CED) and JapanCustoms and Tariff Bureau (JCTB) have in place Red and Green Lanefacilities for the clearance of goods.

a. For goods entering Singapore, CED designates two types oflanes for the clearance of goods, namely the Green Lane andthe Red Lane. Goods channelled to the Green Lane arereleased without any physical examination or documentaryverification. Goods channelled to the Red Lane are subject todocumentary verification and/or physical examination.

b. For goods entering Japan, JCTB classifies them into threecategories, namely, Categories 1, 2 and 3. Goods ofCategory 1 are cleared without physical examination ordocumentary verification. Under Category 2, documentaryverification is conducted and physical examination as well (asand where necessary and based on the results ofdocumentary verification). Under Category 3, physicalexamination is conducted unless there are reasonablegrounds for not doing so.

27. The key to the above selection facility is to identify risk of goods.Both CED and JCTB are currently adopting a risk management approachbased on trade information submitted by the importers in their Customsdeclaration and the type of consignments.

a. In Singapore, goods are grouped into two broad categories,namely high-risk goods and low-risk goods. Low-risk goodsare channelled to the Green Lane. High-risk goods arechannelled to the Red Lane. In assessing the risk, CEDconsiders both qualitative and quantitative attributes such as:

i. the nature of the goods (i.e. commodity type, declaredvalue);


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ii. the compliance records of the importer; and

iii. ground intelligence.

b. In Japan, JCTB classifies goods into three categories, i.e.,Categories 1, 2 and 3, on the same basis as above.

28. There are, however, different approaches for facilitating the releaseof goods in Japan and Singapore.

a. In Singapore, the goods are released under a single windowprocedure, whereby the Customs duty and Goods andServices Tax (GST) are electronically paid and all othergovernment agencies’ procedural requirements arecompleted at the same time.

b. In Japan, in addition to computerising customs procedures,the “Simplified Procedure” will be implemented from March2001. Under this procedure, physical examination and/ordocumentary verification for customs duty payment is, inprinciple, not required for imports by persons authorised bythe Customs. This is made possible through measuresincluding checking the importers’ compliance record bothupon authorisation and after clearance.

29. To further facilitate the clearance of low-risk goods, and to improvethe predictability of cargo clearance, the Joint Study Group agreed thatboth Customs Administrations should exchange information on bestpractices relating to risk management techniques for customs clearance.

30. The Joint Study Group also agreed that both CustomsAdministrations should promote the application and improvement of riskmanagement to other ASEAN countries. This would raise the quality ofrisk management within ASEAN and ensure a reasonable level ofpredictability for clearance, and thereby facilitate the entry of Japaneseand Singapore goods into ASEAN countries. The Joint Study Group alsoagreed that the adoption of a common tariff nomenclature for ASEANwould complement the risk management initiative. The Joint Study Groupagreed that the adoption of risk management techniques andimplementation of a common tariff nomenclature within ASEAN could bepursued under the ASEAN Experts Committee on Customs Matters(ECCM) forum, through seminars and courses. 6 Japanese experts on risk

6 At the inaugural meeting of the ASEAN-Japan Director-Generals of Customs on 14

July 1999, it was agreed that the ASEAN ECCM would hold regular consultations with


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management and the Harmonised System could be invited to speak at theseminars and courses to be conducted under the auspices of Japan’stechnical cooperation programme.

Intellectual Property Rights Protection

31. The Joint Study Group recognised the growing importance ofintellectual property rights (IPR) protection, and agreed that the twoCustoms Administrations could exchange statistical informationconcerning goods under suspension of release in connection withsuspected IPR infringement, subject to the national laws in each countryand the provisions of the WTO Trade-related Aspects of IntellectualProperty (TRIPS) Agreement.

Exchange of Information regarding Best Practices on CustomsProcedures and Enforcement Techniques

32. The Joint Study Group also agreed that cooperation between thetwo Customs Administrations could be further enhanced through theexchange of information regarding best practices relating to customsprocedures and enforcement techniques, subject to the national laws ineach country.

Paperless Trading

33. Despite the advent of new technologies especially in the field of ICT,international trade is still heavily paper-based and continues to rely onpostal and courier services for the transfer of documentation. Accordingto United Nations estimates, trade documentation costs an average 7percent of the total value of international trade. In other words, someUS$400 billion a year is spent administering paper-based systems anddocumentation. In addition, the loss or late arrival of trade documents is acommon worry to traders who rely on postal or courier services to transfertheir documents.

34. As such, proposals/initiatives that allow informationto be filed andtransferred electronically would significantly enhance the efficiency ofinformation/document flow, confer benefits on businesses and facilitatetrade. However, it is important that such electronic delivery systems donot compromise the confidentiality or integrity of the information/documentsubmitted or transferred.

35. In this regard, the Joint Study Group noted that there was much

their Japanese counterpart at the ECCM to develop areas of technical cooperation.


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merit in establishing an Electronic Trade Document Exchange System(ETDES). The Joint Study Group agreed to explore the possibilities ofputting in place such a system under the JSEPA, which would conferadvantages in speed, cost and security on trade transactions between thetwo countries. It would allow the seamless electronic transfer of all trade-related information and documents (e.g. invoices, bills of lading, etc)between importers and exporters in Japan and Singapore (i.e. “paperlesstrading”). Such a system would also safeguard the confidentiality andintegrity of the documents or information exchanged.

36. The document exchange servers to be set up in Japan andSingapore are meant for traders to deposit all the necessary informationand documents pertaining to a particular trade transaction. Theseinformation and documents will then be electronically channelled to therelevant parties, as authorised by the traders. An example of a possibleconfiguration of the ETDES is elaborated at Annex 1.

37. In this connection, the Singapore side also presented TradeNet, anelectronic one-stop service system for clearance procedures, andTradeNet Plus, an extensive electronic network system covering all trade-related activities. The Japanese side explained their recent efforts towardthe one-stop service and development of the G7 initiative on electronicdata interchange (EDI) standardisation in customs procedure and itsTrade & Settlement Electronic Data Interchange (TEDI) project. Bothcountries are exchanging information on these initiatives, bearing in mindvarious aspects including efficiency, operation, control and costimplications.

MUTUAL RECOGNITION

38. The Joint Study Group proposed that Japan and Singapore couldstudy the feasibility of establishing a mutual recognition agreement (MRA)under the JSEPA.

39. The Joint Study Group agreed that there was a strong case for bothcountries to establish a MRA, since Japan and Singapore alreadymaintain standards and conformance infrastructures of high quality andtechnical competence. Moreover, both countries would stand to gain interms of:

a. trade facilitation – a MRA would facilitate trade betweenJapan and Singapore by (i) reducing the costs associatedwith duplicative testing and certification and (ii) shortening thetime-to-market for products covered under the MRA. (The


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latter is especially critical for technologically advancedproducts with short life cycles); and

b. greater investments – a MRA would also help to positionJapan and Singapore as the conformity assessment hubs inthis region and thereby also help to draw more investmentsand trade into each country.

40. The Joint Study Group also agreed that both countries couldundertake a feasibility study to review each country’s standards andconformance infrastructure, and to determine the possible types of mutualrecognition as well as the possible sectors that could be covered underthe MRA. The findings of such a study would provide useful inputs for thenegotiation of a MRA under the JSEPA.

NON-TARIFF MEASURES

41. The Joint Study Group agreed to identify non-tariff measures(NTMs) in each other’s regime that might unduly affect bilateral trade andexplore the possibility of eliminating them or introducing disciplines toensure that these NTMs do not act as unnecessary obstacles to trade.This process of identifying NTMs need only be started when the twocountries begin JSEPA negotiations.

ANTI-DUMPING/COUNTERVAILING DUTY/EMERGENCYSAFEGUARDS

42. To underscore Japan's and Singapore's shared philosophy againstprotectionist and arbitrary use of such unilateral remedies in theinternational trading system and to contribute towards the WTO’sobjective of promoting freer trade, the Joint Study Group noted that itwould be desirable to establish model anti-dumping (AD)/countervailingduty (CVD)/safeguard rules in the JSEPA. The two countries couldexplore the possibility of going beyond the WTO framework in these areas.

43. The Joint Study Group identified four alternatives, which could beconsidered in the JSEPA.

a. Since both Japan and Singapore have rarely taken ADactions and have never initiated any CVD actions, bothcountries could consider not applying AD actions exceptwhere it pertains to predatory pricing. The two countriescould also work towards a framework to exempt each other


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from future CVD actions and safeguard measures taken bythe other party.

b. Both countries could consider not applying AD actions againsteach other’s exports under the JSEPA while maintaining CVDactions and safeguard measures, on condition that bothcountries take appropriate measures against anti-competitivebusiness practices such as predatory pricing and establish acooperation mechanism in the field of competition policy.

c. Both countries could model the JSEPA provisions onAD/CVD/safeguards along the WTO rules but strengthenthem to bring greater discipline to the use of such measuresand minimise the opportunities to use these measures in anarbitrary or protectionist manner. This could take the form ofhigher thresholds (e.g. higher de-minimis margin and/orimport volume), shorter duration for imposition of dutiesand/or use of a competition test on actions brought by onecountry on imports of the other.

d. Both countries could simply affirm their rights and obligationsin the WTO Agreements on AD, CVD and Safeguards.

44. The Joint Study Group, however, acknowledged that whilst non-application of AD/CVD/safeguards would have a significant positivedemonstration effect, there were differing interpretations regarding itsconsistency with the WTO MFN obligation. In addition, the Joint StudyGroup noted that businesses might be concerned if the ability of eithercountry to impose AD/CVD/safeguard measures were removedcompletely.

45. The Joint Study Group agreed that this would be a subject forfurther negotiations in the JSEPA.

SERVICES

46. Presently, around 20% of total world trade are in services, but thistakes into account only cross-border trade.7 In considering thesignificance of trade in services, it is necessary also to take into accounttrade through commercial presence and movement of natural persons.There is tremendous potential for growth in services trade. Already,

7 Source: WTO Annual Report 1999, International Trade Statistics.


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technology has rendered more and more services exportable. Many of theservices spawned by technological progress have high value-added andknowledge content.

47. Today, the services sector is increasingly sophisticated with stronglinks to the manufacturing sector. Services provide the connections,coordination and support for the manufacturing process and oftengenerate demand for new industrial products.

48. The services sector is integral to a country’s overallcompetitiveness. First, infrastructure services such as finance,telecommunications and information processing permeate the entireeconomic structure. Secondly, in most countries, the services sector isthe largest single contributor to economic growth and employment. InJapan, services accounted for 64.5% of its GDP and 62% of employmentin 1998. 8 In Singapore, the sector contributed 63% of GDP and 70% ofemployment in 1998. 9

49. In both countries, however, a gap still exists between their exportcompetitiveness in goods and their export competitiveness in services.This gap is clear from the following table, based on 1998 figures providedby the WTO. There is untapped potential in the services sectors of bothcountries.

Table 2: WTO Ranking of Trade in Goods and Services

Merchandise Trade Services Trade

Japan 3rd Largest Exporter in theWorld (7.2% of total worldmerchandise trade)

6th Largest Exporter in theWorld (4.7% of total worldservices trade)

Singapore 14th Largest Exporter in theWorld (2.0% of total worldmerchandise trade)

17th Largest Exporter in theWorld (1.4% of total worldservices trade)

50. Singapore has therefore in recent years channelled efforts intodeveloping itself into a premier services hub. Singapore has fully openedup its telecommunications sector and has begun liberalising its financial,

8 Source: Economic Planning Agency (EPA), Japan9 Source: Ministry of Trade and Industry (MTI), Singapore


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legal and media services sectors. A review of the other services sectors,including utilities, will be undertaken in the next few years. On its part,Japan has taken great strides in creating and promoting a pro-competitivemarket environment for services, including telecommunication services.

51. The Joint Study Group therefore strongly endorsed the inclusion ofliberalisation of trade in services in the JSEPA. The Joint Study Groupregarded services liberalisation and cooperation as key elements thatwould greatly enhance the economic value of the JSEPA to the Japaneseand Singapore business communities, and promote the growth of theservices sector of both countries.

Possible Negotiating Parameters

52. The Joint Study Group agreed that the JSEPA would establish aframework of principles and rules for trade in services. The aim is toexpand bilateral trade in services under conditions of transparency andprogressive liberalisation.

53. The Joint Study Group further agreed that:

a. the negotiations shall cover all services sectors and allmodes of supply, with the exception of hard rights in airtransport services and cabotage in maritime transportservices;

b. the negotiating framework will be modelled after the GATS;

c. the GATS hybrid listing approach, which is familiar to bothcountries, will be employed; 10

d. the commitments by both countries shall cover a widespectrum of services sectors to ensure consistency with thesubstantial sectoral coverage requirement in GATS ArticleV.1(a). Nevertheless, priority could be given to sectors thatare either critical to the infrastructure of a country or are thegrowth areas of the future, for example, information andcommunications technology, financial services andprofessional services;

e. the commitments of each country under the JSEPA should be

10 The GATS uses a positive list approach to identify sectoral coverage and then a

negative list to indicate limitations to market access and national treatmentcommitments in respect of sectors listed in schedules.


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GATS-plus bearing fully in mind the need to be consistentwith GATS Article V. The negotiated commitments should beimplemented either immediately upon entry into force of theJSEPA, or within a reasonable period; and

f. a built-in review process for further liberalisation can beincluded into the framework.

54. In particular, the Joint Study Group agreed that the JSEPAnegotiations should cover liberalisation of the financial services sector.The Joint Study Group recognised the importance of improving theefficiency and competitiveness of the two countries’ financial markets, andthe opportunities for both countries that could result from the creation ofan environment conducive to the expansion of trade in financial servicesbetween the two countries and Asia. Both countries should work towardssignificant improvements of their GATS commitments in financial servicesunder the JSEPA. The Joint Study Group suggested that the approach ofthe GATS Annex on Financial Services be adopted. The GATSUnderstanding on Commitments in Financial Services might also be auseful basis to start discussions under the JSEPA.

55. The Joint Study Group also noted that there already existedexcellent bilateral maritime links, which could be enhanced so as tofacilitate the movement of goods between the two countries and to helprealise the full benefits of a JSEPA. Regretting the suspension ofnegotiations in the WTO on the maritime transport services, the JointStudy Group agreed that this sector should be included in thecommitments under the JSEPA.

INVESTMENT

56. Worldwide investments have increased significantly in recent years.However, some countries still impose restrictions on foreign investment toprotect domestic industries and/or to prevent the outflow of foreignreserves. There lacks a comprehensive and legally-binding regional ormultilateral investment agreement that provides for the liberalisation andprotection of foreign investments.

57. Japan and Singapore are relatively open economies with attractiveinvestment regimes. Both countries enjoy strong inward investment flows.To create even more favourable conditions for bilateral economicactivities, and to stimulate bilateral business initiatives and investmentflows between the two countries, the Joint Study Group agreed toestablish an exemplary investment framework with progressive


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liberalisation of investment regulations, that could be propagated to othercountries in the future.

58. Such an exemplary investment framework would include thefollowing elements:

a. principles of National Treatment and Most Favoured Nationtreatment which would form the cornerstone of the investmentframework;

b. provisions on expropriation and compensation to preventindiscriminate expropriation and/or unfair compensation offoreign investments, which would instil confidence ininvestors;

c. provisions on transparency as it is important that foreigninvestors are not subjected to arbitrary rules and regulations;

d. provisions to allow investors to freely repatriate and transferfunds related to foreign investments (such as profits,dividends, royalties, loan payments and liquidations) intofreely convertible currency;

e. provisions to facilitate dispute resolution through consultationand negotiations between the parties (which include theStates and their investors) for foreign investment or failingthis, through arbitration procedures acceptable to bothparties;

f. provisions to prohibit performance requirements which arelikely to have distorting effects on business activities; and

g. provisions for a joint committee to periodically review theimplementation of the investment framework and to discussany other matters in connection with investments betweenboth countries.

59. The Joint Study Group noted the importance, under the JSEPA, offacilitating the movement of professionals between the two countries, andthe employment and training of skilled personnel, including nationals ofthird countries, by Japanese enterprises in Singapore and Singaporeenterprises in Japan.


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INTELLECTUAL PROPERTY

60. The Joint Study Group recognised the importance of intellectualproperty protection in the new knowledge-based economy. In such anenvironment, intellectual property, relative to physical assets or financialcapital, is gaining importance as a factor of economic competitivenessand success.

61. The WTO TRIPS Agreement is widely recognised to be the mostcomprehensive international agreement on IPR in terms of coverage. Inthis regard, the Joint Study Group agreed that the WTO TRIPSAgreement could govern and apply to intellectual property issues arisingfrom the JSEPA.

62. In light of the recent accession of Japan to the Protocol Relating tothe Madrid Agreement concerning the International Registration of Marks,the Joint Study Group agreed that the accession of Singapore to the sameProtocol could facilitate the registration of marks filed from one of the twocountries to the other.

GOVERNMENT PROCUREMENT

63. Both countries are already party to the WTO GovernmentProcurement Agreement. The Joint Study Group agreed that the WTOAgreement could govern and apply to all government procurement issuesarising from the JSEPA.

64. Building upon this common denominator, the Joint Study Groupagreed that both countries could explore further cooperation in thefollowing two areas.

a. Japan and Singapore could share their experiences andexpertise in developing e-commerce systems for governmentprocurement. While the general principles governinggovernment procurement are similar, the detailed process,workflow and methodology of implementation, including theapproach to interfacing or integrating with the government’sand the private sector suppliers’ financial systems, coulddiffer substantially. Specific areas in electronic procurementthat could be explored include:

i. the functional specifications of the electronicprocurement system;

ii. the development approach;


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iii. security concerns;

iv. the systems deployment strategy;

v. registration of participating suppliers;

vi. a Trading Partner Agreement for electronic trading; and

vii. setting up of training and technical support centre.

b. Japan and Singapore could co-ordinate efforts and organiseworkshops to assist other ASEAN countries in this area. Theworkshops could either be sponsored by international fora orjointly financed by Japan and Singapore. The Joint StudyGroup noted that both countries were already activelycontributing to enhancing the knowledge of less developedcountries in government procurement by providing lecturersat various workshops, such as those sponsored by APEC andASEM.

COMPETITION POLICY

65. Today, anti-competitive practices in domestic markets constitutepossible trade barriers. There may therefore be an increasing need foreach country to deal with anti-competitive practices.

66. With globalisation, anti-competitive practices could affect theconditions of competition in both countries. Under such circumstances, itmay be difficult for a single government to correctly assess thedistortionary effects on trade, and to effectively deter anti-competitivepractices that have cross-border effects. To unilaterally eliminate themthrough competition laws or trade measures may be ineffective.

67. Japan and Singapore have been successful in ensuring freer andfairer competition in their markets. To maximise the benefits that wouldaccrue to the two countries, the Joint Study Group agreed on the need to,under the JSEPA, establish a framework on competition policy to dealwith anti-competitive practices that may have an adverse impact on tradebetween the two countries.

68. This framework on competition policy would include the followingelements:


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a. to promote freer and fairer competition in trade between thecountries;

b. to minimise trade distortions between the two countries, eachcountry shall take appropriate measures as it deems fit,against anti-competitive business practices; and

c. to make efforts to cooperate in areas such as notification,consultation and technical assistance, with a view tofacilitating effective and smooth implementation of thisframework, and promoting a common understanding of moreeffective ways to address anti-competitive business practices.


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II. BILATERAL COOPERATION

FINANCIAL SERVICES

69. Rapid technological advances in the financial sector are breachinggeographic, industry and regulatory barriers. Technology has now madepossible more sophisticated and swift distribution networks that interactwith parties globally, offering a broad range of financial products. Therapid consolidation of global financial players is also changing theinternational financial landscape.

70. Recognising the importance of responding positively to the globaltrends and uncertainties, the Joint Study Group recommended that, inaddition to liberalisation of trade in financial services, bilateral cooperationin financial services should be strengthened.

71. The Joint Study Group discussed many ideas as possible areas forfuture cooperation. Such ideas included regulatory issues, capital marketlinkages, improvement of market infrastructure, development of regionalbond markets and technical assistance to third countries. The Joint StudyGroup recognised that the ideas discussed would need further carefuldeliberation by experts and various relevant agencies and parties. Notingthe preliminary nature of many of the suggestions discussed, the JointStudy Group agreed that it would be worthwhile for monetary and financialauthorities of both countries to hold bilateral discussions on those issuesthat would be appropriate for more substantive discussion, taking intoaccount changing circumstances (Annex 2 outlines the Joint StudyGroup’s discussions).

72. The Joint Study Group also agreed that the above-mentionedbilateral discussions should complement on-going multilateral initiatives insimilar areas.

INFORMATION AND COMMUNICATIONS SERVICES

73. Info-communication technologies and services have transformedthe global economy, leading many to call this era the Information Age.The convergence of telecommunications and information technology hascreated new issues for governments around the world, as has the growthand pervasive power of the Internet. 11 In the Digital Economy, reliable

11 As at December 1998, there were 95.4 million Internet users around the world. By the


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access to as well as prompt delivery, efficient management and skilleduse of information have become cornerstones of economic growth.

74. The sector has been fundamentally changed by the advent ofmarket liberalisation and robust competition. As the number of serviceofferings and business possibilities mushrooms, operators have sought toconsolidate their market power via mergers and alliances. The role thatgovernments play has, in turn, evolved into that of protector of consumers,arbiter of fair competition and promoter of info-communicationsdevelopment.

75. Electronic commerce has also revolutionised the way in which tradeis conducted. By leveraging on technology, buyers and sellers canovercome obstacles of size, language and geography, and bypasstraditional intermediaries to have truly global market reach in a more cost-effective manner. As a result, conventional value chains are beingdismantled and reassembled in totally new ways.

76. The Joint Study Group acknowledged that the info-communicationssector is essentially industry and technology driven. It noted, however,that Governments still had an important role to play. The following areascould be the focus of cooperation under the JSEPA:

a. enhancing the security of the communications infrastructureand the level of trust in its use for new applications;

b. creating legal and regulatory certainty for electronictransactions (including enforcing the privacy of consumersand the protection of their personal data);

c. ensuring the effective and efficient management ofcompetition in a converged and dynamic info-communicationssector; and

d. educating users and promoting their use of e-commerce andthe Internet (including by having Governments as modelusers and considering a moratorium on customs duties on

end of 1999, an additional 35.2 million will come online. Over 56% of the world'sInternet users today reside in the US and Canada. However, it is anticipated that by2002, North America’s share will shrink to just over 34.8%. Europe will be home to 84million users, or 29.9% of the world’s total. Asia will have over 60 million users, or21.5% of the world’s total (Source: The eGlobal Report, Jul 99). This present AsianInternet population is expected to grow to 400 million by 2005 (Source: Paul BuddeCommunication, NUA Internet Surveys, 9 Jun 00). The number of Asian Internet hostshas also grown from 2.6 million in 98 to 4.2 million in 99 (Source: ITU-Internet hostdata: Internet Software Consortium, RIPE, May 00).


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electronic transmissions).

77. The Joint Study Group also noted that there are many on-goingcooperative activities between Japan and Singapore in this sector. Forexample, in 1998, Japan’s Minister of Posts and Telecommunications andSingapore’s Minister for Communications decided to establish the Japan-Singapore Advanced Multimedia Cooperation Committee (JSAMCC) toenhance bilateral cooperation in advanced multimedia issues. 12

78. In assessing the desired areas of co-operation in info-communications, the Joint Study Group has in mind the role of the JSEPAas a catalyst for the development of relevant policies for this sector. Asia-Pacific countries will soon have to establish the necessary regulatoryand policy framework in order to succeed in the Digital Economy. Asrelatively advanced Asian countries, any joint framework which Japan andSingapore can set under the JSEPA could in turn, be of some use to otherAsian countries as they evolve their own strategies so as to spur thegrowth of regional e-commerce. 13

79. Singapore presented, at the request of the Joint Study Group, a listof items now being considered under the e-ASEAN initiative, including:

a. the development of an ASEAN Information Infrastructure (AII);

b. the facilitation of e-commerce through measures like thedevelopment of the necessary legal infrastructure andindustry-driven codes of practice;

c. the facilitation of free flow of trade and investment in ICTgoods and services;

d. e-Society; and

e. e-Government.

12 This included cooperation on advanced multimedia and R&D projects such as the APII

test bed, the multimedia virtual laboratory and the digital terrestrial broadcastingsystem.

13 In 1999 alone, e-commerce transactions for Japan and Singapore amounted to US$7.3billion and US$83.3 million respectively (Source: AWSJ; CINC; IDC; Nielsen; NUAInternet). GartnerGroup (Jun 00) has further indicated that the Asian e-commercebusiness-to-consumer market is estimated to hit US$100 billion with the business-to-business market estimated at US$1 trillion by 2004. Both Japan and Singapore are wellplaced to take advantage of this e-commerce potential with Internet penetration ratesof 27% (Source: Nikkei BP AsiaBizTech, 13 Apr 00) and 53% (Source: www.ida.gov.sg,9 May 00) respectively.


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80. The Joint Study Group acknowledged that there were similaritiesbetween the cooperation items under the JSEPA and e-ASEAN, andnoted that both efforts could, where appropriate, complement one anotherso as to develop a seamless environment conducive to the growth of e-commerce and ICT networks in the region.

81. The Joint Study Group therefore recommended that the JSEPAcould address the following info-communications issues, bearing in mindthe need to include the private sector in these co-operative efforts. TheJoint Study Group recognised that these issues would need further carefuldeliberation by experts in all relevant agencies and parties.

82. Nevertheless, the Joint Study Group viewed these areas ofcollaboration as an excellent starting point for ongoing bilateral dialogueand cooperation as well as an opportunity to show regional leadership.The Joint Study Group reiterated the importance of incorporating concreteand cohesive action on these issues when crafting the JSEPA, so that ittruly reflects the importance of bilateral trade relations in the DigitalEconomy.

Protection of Personal Data/Privacy Collaboration

83. Work in this important area will promote consumer confidence andin turn, spur cross-border e-commerce. It would also help align bothcountries’ practices and procedures so that accredited sites in bothcountries afford Japanese and Singapore consumers a similar degree ofprotection. The Joint Study Group agreed that the JSEPA could addressthe following issues:

a. the exchange of information on and, where appropriate, theharmonisation of Japan’s and Singapore’s privacyframeworks;

b. the cross-recognition of privacy marks in each country; and

c. the joint study and exploration of a viable privacy/dataprotection model for both countries.

Electronic Commerce Legislation and Cross-certification for theInteroperability of the Public Key Infrastructure (PKI)

84. The Joint Study Group agreed that there was scope for cooperationamong all relevant Japan and Singapore agencies and entities to:


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a. exchange information on and, where appropriate, harmonisetheir e-commerce legislation; 14

b. identify and, where appropriate, harmonise their Public KeyInfrastructure (PKI) security requirements; and

c. jointly contribute to and promote on-going efforts at APEC tocreate a regional PKI interoperability framework.

85. These activities will instil trust in the integrity of the electronicplatform used for trade and communication and address legal, regulatoryand enforcement issues in cross-border e-commerce. The recent wave ofon-line sabotage, computer crime and other threats to criticalinfrastructure necessitate this.

Regulatory Cooperation to Manage Competition in the Info-communication Sector

86. The Joint Study Group recognised that cost-effective and reliableaccess to telecommunications systems and services underpin economicactivity in the Information Age. The Joint Study Group acknowledged thecomplexity of info-communication policy, including regulating andmanaging competition in a multi-operator environment. It reiterated theneed for regulatory approaches to be flexible enough to support growthand innovative new technologies and services, but robust enough toensure free and fair competition on a level playing field.

87. The Joint Study Group agreed that Japan and Singapore could:

a. exchange information on their respective regulatoryframeworks for the management of competition in the info-communication sector;

b. create a joint "best approaches" regulatory framework forboth countries to consider using; and

c. promote dialogue and cooperation on these issues betweeninfo-communication policy institutes of both countries.

14 This could possibly include consideration of the following: liberalisation of e-commerce

related sectors and regulatory frameworks for these sectors, scope of IPR protection incyberspace, personal data protection, legal effect of electronic signatures and securitylevel of certification authorities, rules of contract for digital content, liability relating toonline service providers, consumer protection, regulation of harmful/illegal contents,prevention of computer crimes and the removal of unnecessary regulatoryimpediments to e-commerce.


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Cooperation in Postal Services

88. In spite of the advent of e-mail and other electronic forms ofcommunication, traditional postal services continue to be a reliable andtreasured way of communicating, conducting business and keeping intouch. The Joint Study Group agreed that the enhancement of the qualityof postal services as well as the introduction of new services betweenJapan and Singapore could be facilitated by further cooperation betweenboth countries’ respective postal operators.

Interactive Broadband Multimedia (IBBMM) Collaboration

89. Both Japan and Singapore have rolled out high-capacity broadbandnetworks and are working to capitalise on the growing demand in bothcountries as well as in the rest of the world for bandwidth-intensivemultimedia content. Building on both countries’ respective strengths,Japan could use Singapore as a gateway to re-package and distributeJapanese content to English and Chinese-speaking markets.

90. The Joint Study Group therefore agreed that the relevant agencies,entities and organisations could consider the following co-operativeactivities:

a. the establishment of a physical broadband linkage betweenJapan’s and Singapore’s IBBMM networks; and

b. the exchange of media-rich multimedia content using this link.

e-Government

91. The Joint Study Group noted that both the Japanese and Singaporegovernments were progressively becoming more wired and wereexploring new ways to communicate internally, store information, transactand procure business, and deliver services to citizens electronically. Thistrend, called e-Government, is essentially domestic in scope. However,the potential exists for both countries to share experiences with oneanother under the JSEPA and explore possible collaboration in e-Government projects.

SCIENCE AND TECHNOLOGY

92. Over the last few decades, Japan has effectively and successfullyleveraged on innovative technologies and know-how to strengthenbusiness capabilities and secure a leadership position in the globaleconomy. Singapore, too, has made significant strides in building up its


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technological and scientific foundation to world-class standards.

93. In a knowledge-based economy, the role of science and technologywill assume greater importance. The ability of firms to innovate andreduce time-to-market will become increasingly important in determiningcompetitive advantage. Likewise, the ability of countries to exploit newhigh-growth science and technology sectors and to re-invent themselvesis key to their continuing economic vibrance.

94. Japan and Singapore already cooperate in science and technologyfields at the bilateral and regional levels. The Joint Study Grouprecognised the possibility that both countries could further leverage oneach other’s strengths and deepen cooperation in areas such astechnology and market intelligence (TMI), venture capital, life sciencesand environmental technology.

Technology & Market Intelligence (TMI)

95. One key success factor of present-day global competition is thespeed of commercialising intellectual property (IP) (i.e. know-how,creative works, new processes and technologies) in ways that translateinto new value-added goods and services for customers. To achieve this,companies must monitor and evaluate external environmental factors,such as technology and market trends to determine opportunities forcurrent and future businesses. There is certainly no lack of data andinformation today. We are inundated by massive amounts of informationfrom journals, reports, Internet, etc. We need a mechanism to filter andanalyse information to make sound business decisions.

96. Technology and market intelligence is a strong competitive tool forcompanies to compete globally in the knowledge era. Currently, however,not enough is understood by our smaller companies, particularly the smalland medium enterprises (SMEs) and start-ups, of environmental trends(product, technology, legislative and regulatory, market dynamics andcompetitor analyses, to support decision making for business growth andregional market penetration.

97. The Joint Study Group agreed that there is much scope for Japanand Singapore to collaborate in strengthening their respective intellectualproperty frameworks and in promoting the use of IPs, leading to mutualbenefits for hi-tech companies and start-ups of both countries.Specifically, it was agreed that both countries could jointly undertake thefollowing:

a. Training and exchange of experts in collaboration with theorganisations concerned. Japanese candidates who


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participate in the training programme would be from theJapanese Patent Office (JPO), Japan Institute of Inventionsand Innovations (JIII), Japan Patent Information Organisation(JAPIO), and JETRO. As for Singapore participants, thesewould be from the TMI Service Bureau (TMISB), localuniversities, research institutes, and the Intellectual PropertyOffice of Singapore (IPOS). The Joint Study Group notedthat such training and exchanges would contribute to a betterunderstanding of each other’s IP laws particularly in the areaof patent laws, and could lead to other areas of cooperation inIP in the future. As one of the matters that could be dealt within the course of the expert exchanges, the Joint Study Groupsuggested that the two countries explore the feasibility ofincluding the JPO as a prescribed patent office for thepurposes of furnishing prescribed details/information ofcorresponding foreign applications under the SingaporePatents Act.

b. Sharing of databases on patents. This will benefit Japaneseand Singapore companies which want to exploit existingtechnologies currently patented in Japan or Singapore. IPOSand JPO would collaborate in considering the ways ofcooperation on information sharing on IP patents. Possibleways of cooperation could include:

i. providing access to each other’s public databases; and

ii. facilitation of licensing of IPs or even patent trading ortechnology through this platform.

This way, Singapore can help to promote Japan’s patentswhich have not been commercialised and vice-versa.

c. Promoting public awareness and education of the importanceof intellectual property rights (IPR) protection. Given thelarge amounts of money often spent in developing new ideasand innovating new products, it is important that businessesin both countries are fully aware of the value of IP and theimportance of securing IPR protection. In this regard, IPOSand Japan’s patent-related and copyright-relatedorganisations could, in the area of IPR public education,share intellectual property information and experiences onpublic education and awareness programmes.

d. Exchanging information on copyright. IPOS and Japan’scopyright-related organisations could exchange information


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and experiences concerning legislation on copyright in termsof the progress of digitization and network and thedevelopment of e-commerce.

Technopreneurship

98. The Joint Study Group recognised that innovative companies are animportant engine of growth, as evidenced in the high growth rates in theUS economy in the past decade.

99. The Joint Study Group took note of the value of cooperationbetween the business communities of both countries to promoteinvestments in start-ups in the region. In this context, Japanese investorscould leverage on Singapore’s Technopreneurship programme.

Life Science and Environmental Technology

100. The Joint Study Group further agreed that Japan and Singaporecould cooperate under the ambit of the JSEPA to explore the possibility ofcollaboration in life sciences and environmental technology.

101. The Joint Study Group, in particular, supported the efforts of theMinistry of International Trade and Industry (MITI) and the SingaporeEconomic Development Board (EDB) to promote bilateral cooperation inlife sciences. The Joint Study Group suggested that both parties shoulddevelop the collaboration further. As a first step, researchers in bothcountries would jointly organise symposiums/workshops and discuss thepossibility of joint research activities in the post-genomics field.

102. In addition, both countries could undertake exchange of information,consultation on cooperation or joint studies and research projects amongthe institutes in the following possible areas, for example:

a. cancer gene therapy, cancer immunotherapy,neurodegenerative diseases, cardiovascular diseases andinfectious diseases;

b. characterization of fish cytokine, water circulation technologyfor the fish hatchery system, development of “super-smallalgae” as feed for fingerling, mechanism of sex determinationof fish; and

c. industrial and municipal wastewater treatment and recycling,industrial waste treatment and recycling, and industrialprocess waste minimisation.

103. The Joint Study Group noted that such cooperation could be


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expanded to the region. For instance, Japanese companies couldleverage on Singapore to penetrate the ASEAN market. Currently,Japanese companies may be unfamiliar with the requirements andsystems of the various ASEAN countries and find it cumbersome toundergo drug registration in each of the markets. Singapore could be abase for Japanese companies to co-ordinate and conduct clinical trialsand develop their dossiers for drug registration in these countries.

104. Likewise, in the area of environmental services and technology,both countries could cooperate in this emerging field with a view todeepening competencies and capabilities and eventually to sharing theirexperiences with neighbouring countries.

TRADE AND INVESTMENT PROMOTION

The Extension of the Cooperation Agreement between ECICS andEID/MITI

105. Trade and investment insurance is an essential component of thecommerce value-chain. In a competitive business environment,companies must balance the need to win new and repeat orders fromcustomers through the extension of credit, against the effect that suchcredit sales will have on their balance sheet and the risks of non-payment.Export insurance protects exporters against such loss. It gives themconfidence to export and improves their competitive position. Insurancecan also include protection against loss of assets and investments forcompanies expanding abroad.

106. During the height of the financial crisis in 1997 and 1998, manycompanies in Asia cancelled their import orders. Many went bankrupt.Large long-term private sector and government-funded projects wereterminated or shelved indefinitely. On hindsight, export and investmentinsurance might have lessened the impact on numerous companies thatwere exporting to and/or investing in these Asian countries. Banks andfinancial institutions might also have limited their exposure to the region.

107. Current Scope. The existing ECICS-EID/MITI MOU is therefore awelcome source of investment insurance for companies.

108. Under the current scope of the MOU, EID-MITI will reinsure up to90% of overseas investment insurance that ECICS issues to bothJapanese subsidiaries operating from Singapore and Singaporecompanies planning to invest overseas. As it stands, the reinsuranceagreement covers only overseas investments against political risks


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including confiscation, expropriation or nationalisation of assets and/orinvestments; and events such as war and civil commotion.

109. Proposed Enhancement. The Joint Study Group welcomed theinitiative by ECICS and EID/MITI to enhance the MOU by extending thescope of business activities covered from only overseas investment(currently) to include medium to long-term (2 years or more) exportinsurance for the export of goods and services.

Joint Trade and Investment Promotion

110. The Joint Study Group agreed that, as leading trade promotionagencies, JETRO and TDB would discuss the possibility of collaborationby co-organising trade and investment missions and business seminarsand sharing databases:

(a) Trade and Investment Missions

111. A current trend amongst Japanese companies is to shiftmanufacturing operations to regional markets such as China and ASEANto take advantage of lower costs of production. Hence, there is amplescope for Japanese companies to partner with Singapore companiesspecialising in third party logistics and/or Singapore companies withextensive network in these countries. To help create such opportunities,JETRO and TDB could jointly organise trade and investment missions toASEAN and other areas.

(b) Business Seminars

112. The Joint Study Group noted that the recent logistics seminarsconducted by TDB were well-received by the Japanese community,attracting some 245 and 65 participants in Tokyo and Osaka respectively.By providing a platform for businessmen to network and exchangecontacts with one another, such seminars help to promote greater mutualunderstanding between the business communities in both countries. Inthis regard, the Joint Study Group agreed that JETRO and TDB couldjointly organise industry-specific seminars that are of interest to theprivate sectors in Japan and Singapore. JETRO and TDB could alsoencourage business associations like Japan Federation of EconomicOrganisations (Keidanren) and the Singapore Business Federation tojointly organise trade/investment seminars where there is sufficient mutualinterest.

(c) Joint Promotion

113. JETRO and TDB could also help to market each other’s products intheir respective markets. As a start, JETRO and TDB could actively


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promote the trade fairs/exhibitions held in Japan and Singapore. Byhyper-linking to the exhibition organisers’ web-sites, interestedparticipants will be able to obtain information relating to theexhibitions/trade fairs.

114. The Joint Study Group suggested that it would be meaningful toexplore licensing and branding opportunities for companies. For example,Japanese pharmaceutical companies could acquire well-known Singaporebrands to market their own products in the region.

(d) Database Sharing through Electronic Linkages (Electronic Business-Matching)

115. Both JETRO and TDB currently maintain separate databases ofcompanies in search of potential business partners. By sharing thesedatabases and allowing easy access and registration, the two agenciescan help facilitate interaction between Japanese and Singaporecompanies.

116. Further, JETRO and TDB could jointly set up and maintain anElectronic Exchange (E-X) where Japanese and Singapore businessmencould post their business interests electronically. This information will betransmitted instantly via the e-mail alert system to compatible companiesin the other country that have subscribed and indicated their fields ofinterest at the E-X. This virtual match-making system will enableJapanese and Singapore companies to shorten the search time requiredto find suitable business partners. This will translate into greater efficiencyas well as more cost savings for the companies.

117. Information sent to the subscribing companies will include thespecific business interest of the initiating company (i.e., the product,quantity or even the price that the company wishes to buy/sell) and ifavailable a hyperlink to the company’s web-site (thus enabling theaddressee company to obtain the profile of the initiating company).

118. JETRO has developed the previous database service into a newweb-based service called Trade Tie-Up Promotion Program (TTPP) sincethis August in order to build up the function of information service to users.JETRO and TDB could jointly study the possibility of sharing the data oncompanies stored on their respective web sites in order to promotebusiness matching. Once the sharing system is in place, JETRO couldprovide Japanese companies with the relevant information (in Japanese)on Singapore companies which they want to contact, while TDB couldprovide Singapore companies with the information on their prospectiveJapanese customers. JETRO and TDB will strive to solve variousproblems such as a unified data format and renewal of registered data in


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order to promote a business link between Japanese companies andSingaporean companies.


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SMALL AND MEDIUM ENTERPRISES

119. The Joint Study Group acknowledged the important roles that SMEsplay in the economy. In light of these discussions, the Joint Study Groupgave further consideration to the idea of forging closer cooperation inpromoting the SME sectors in Japan and Singapore.

Importance of SMEs

120. The Joint Study Group recognised that enhancing the vitality ofSMEs is of pivotal importance in maintaining economic dynamism. Bynature innovative, flexible and opportunity seeking. SMEs will be theengine of growth in the knowledge-based economies of the future.Healthy SMEs not only stimulate domestic economies but also play anincreasingly important role in cross-border economic activity.

121. In Japan, SMEs have a major role in every sector of the economy,employing above 70% of wage earners and contributing more than 55% ofvalue-added in the manufacturing sector. 15 In Singapore, SMEs accountfor about 51% of the workforce and 30% of the value-added in themanufacturing sector. 16

Challenges facing SMEs

122. The recent Asian economic crisis had and is continuing to haveprofound effects on SMEs. SMEs have been particularly affected by acredit crunch. In the aftermath of the financial crisis, SMEs must nowadapt to the rapidly changing business environment. Four mainchallenges can be identified, as follows.

a. Access to markets. SMEs face special problems related totheir size and may not be able to fully capitalise on theopportunities created by trade liberalisation efforts whetherregionally or globally. SMEs also face difficulties findingpartners or agents for joint ventures. Consequently, theyoften do not have strong international orientations in theirbusiness focus.

b. Access to technology. Applications of information andcommunications technology are a great equaliser for SMEs,allowing them to overcome their size and reach limitations.However, their prospects would be reduced by limited access

15 Source: Management and Co-ordination Agency and Ministry of International Trade

and Industry, Japan16 Source: MITI, Japan


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to or understanding of these technologies.

c. Access to human resources. SMEs often face a shortage oftechnical and management-level human resources. SMEsalso tend to lack the resources to constantly upgrade theskills of their workforce and equip them with new capabilities.

d. Access to financial resources. This is essential for SMEs toupgrade and expand their business operations. Being small,SMEs usually lose out to larger companies in the competitionfor capital and finance.

123. Japan and Singapore have made considerable efforts in promotingtheir SME sectors. In its policy measures for economic recovery, Japanhas placed special emphasis on its diverse SME sectors by, inter alia,expanding financing facilities, providing assistance to develop the humanresources of SMEs and actively supporting entrepreneurship. Likewise,Singapore has put in place a 10-year plan to groom innovative high-growth SMEs, develop productive SME sectors and create a knowledge-based pro-enterprise environment.

Scope for Cooperation

124. Given that SMEs are expected to play a significant role in oureconomies in the future, it is certainly in both countries’ interests tocooperate and further the business partnership between Japanese andSingapore SMEs. These could be achieved as follows:

a. Facilitating Japanese SMEs. The Singapore Productivity andStandards Board (PSB) could work to facilitate the investmentof Japanese SMEs in Singapore, in areas like obtainingemployment passes, accommodation and compliance withother regulatory requirements, where appropriate.

b. Japan Business Centre. A bolder proposal is to establish aJapan Business Centre in Singapore for those JapaneseSMEs keen to explore business opportunities and to exploitthe enormous potential in Southeast Asia. JETRO and PSBare currently exploring the feasibility of setting up such aCentre in Singapore.

125. In addition, the Joint Study Group took note of the potential areasfor cooperation as follows:

a. Networking Programmes. A Technology ConnectProgramme (Tech.Connect) could be set up to facilitatecollaboration and exchange of experiences on R&D between


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Japanese and Singapore SMEs. JETRO and PSB couldspearhead this initiative. JETRO and PSB could also work ona series of networking activities to improve the mutualunderstanding of Japanese and Singapore companies. Forexample, PSB’s Business Connect Programme can be usedto create opportunities for business collaboration betweenSMEs from both countries.

b. Singapore Business Centre. A Singapore Business Centrecould also be established in Japan for Singapore localenterprises interested to explore business opportunities inJapan.

HUMAN CAPITAL MANAGEMENT AND DEVELOPMENT

126. The Joint Study Group noted that considerable potential exists forJapan and Singapore to cooperate in developing human capital. Theknowledge-based economy is one where human capital provides the keycompetitive advantage. We need to foster creativity in our people tocreate new business opportunities and generate a buzz in the economy.Governments must place emphasis on education for our children and ontraining and retraining workers to equip them with the skills necessary tosucceed in this environment. Our people will be the single most importantfactor in future economic growth and prosperity.

127. At the same time, to sustain the region’s recovery amidst the rapidlychanging economic landscape, Japan and Singapore could alsocooperate to assist regional countries in developing their humanresources.

Third Country Programmes for Developing Countries

128. The Joint Study Group recommended that Japan and Singaporeshould explore ways to provide more technical and human resourcedevelopment assistance to newer ASEAN members such as Vietnam, LaoPDR, Myanmar and Cambodia under the Japan-Singapore PartnershipProgramme for the 21st Century (JSPP 21). The JSPP 21 is the extensionof the JSPP and encompasses a wider spectrum of recipient countries.The Joint Study Group acknowledged these efforts and called on therelevant agencies to explore possible means to further strengthen suchbilateral collaboration. The Joint Study Group also recognised thatSingapore is a good location to provide training in skill management andEnglish language.


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129. The Joint Study Group agreed that there was a particular need totrain the people in the regional developing countries in ICT, to preparethem for the Internet Age. As Singapore has the facilities and resources,it could be used as a training hub for such ICT training.

130. The Asian financial crisis has demonstrated the importance ofstrong financial systems and highlighted the need to step up institutionalbuilding and training in the regional countries. The Joint Study Groupsuggested that training programmes conducted under the auspices oftechnical assistance should focus on strengthening economic andfinancial institutions and long-term capacity building. The focus of trainingprogrammes should be in line with the specific needs of the individualcountries in the region to ensure that technical assistance is providedappropriately and efficiently. The Joint Study Group recommended thatboth countries explore how technical assistance can be rendered throughthe enhancement of existing bilateral arrangements and in collaborationwith third parties.

131. The Joint Study Group also considered the possibility of involvingthe private sector in organising training courses under the third countryprogrammes. The trainees could be nominated from Japan-Singaporejoint ventures (JVs) in the third country and trained in Japan and/orSingapore in a company which is a partner of or having business linkageswith the JVs. The JVs and governments of both countries will share thetraining expenses. This will encourage more companies to train their staffin the less developed countries.

Training Attachment/Professional Exchanges

132. The Joint Study Group agreed that Japan and Singapore couldinstitutionalise training attachment programmes between governmentagencies and professional boards. Through visits and discussions,government officials from both countries could share their experiencesand improve their understanding of each other’s policies and operations.

Joint Programmes between Education Institutes

133. The Joint Study Group noted that there was scope for Japan andSingapore to encourage student exchanges at institutes of higher learning.Currently, the National University of Singapore and the NanyangTechnological University have set up joint postgraduate programmes withuniversities such as Massachusetts Institute of Technology and HarvardUniversity. A double degree programme for undergraduates has alsobeen established with the French Grandes Ecoles, the Ecole Polytechiqueand Ecole Centrale Paris.


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134. The Joint Study Group proposed that Japanese and Singaporeuniversities could consider establishing similar undergraduate andgraduate programmes between themselves. The students will be taughtby professors in the Japanese and Singapore universities. As in existingdistance learning programmes with other foreign universities, the studentsneed not leave their countries as the lessons can be conducted by usingtechnologies such as videoconferencing or the Internet. Students canalso download course materials and digitised lectures from the relevantweb sites. The programmes could culminate with a short exchangeprogramme. Besides Japanese and Singapore students, the programmecan also be open to students from regional countries. Students couldperhaps stay in Singapore and proceed to work or pursue highereducation in Japan when they graduate. The Joint Study Group alsosuggested that the universities consider the possibility of mutuallyexempting exchange students from paying tuition fees.

135. To further promote people-to-people exchanges between Japanand Singapore, the Joint Study Group also suggested that Japanese andSingapore universities could bilaterally explore credit transfers.

136. The Joint Study Group noted that there were already existingexchange programmes for high school students between Japan andSingapore. Both countries should continue to explore expanding thescope of these programmes and encourage greater participation.

Working Holiday

137. The Joint Study Group agreed to explore a working holidayprogramme to encourage visits and exchange by young people of bothcountries. This would help promote mutual understanding as well asappreciation of each other’s culture and way of life. Under the programme,arrangements would be made to allow them to enter the other country forholidays for an extended period and also engage in employment as anincidental aspect of their holidays in order to supplement their travel funds.

Responding to an Ageing Population

138. Both the Japanese and Singapore societies are ageing. Thechanging demographics have not only economic but social implications.The Joint Study Group noted that there was therefore scope for bothcountries to share information and experiences in dealing with an ageingpopulation, in areas such as healthcare, housing/land use policies andsocial integration. In particular, both countries could explore ways topromote awareness of early financial planning for retirement. There isalso the possibility of tapping on the experience of the aged by recruitingthem as volunteers to assist in joint training programmes for developing


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countries in South East Asia.

MEDIA AND BROADCASTING

139. With the advent of new broadcasting technologies such as digitalaudio broadcasting (DAB) and digital television (DTV), the broadcastingindustry is well-poised for significant growth in the coming years. Digitalservices allow for more channels and added features such as interactivemultimedia services. This in turn translates into greater opportunities forbroadcasters and content providers.

140. The Joint Study Group suggested that Japan and Singapore shouldcooperate in the development and provision of innovative media andbroadcast services, in areas covering education, information andentertainment, not just for the Japanese and Singapore markets, but alsofor Asia and the rest of the world. The Joint Study Group discussed thefollowing ideas as possible areas for future cooperation.

Broadcasting Technologies

141. As a compact city-state and a microcosm of Asia, Singapore is agood test-bed for new digital products and services. Singapore, with itsmulti-ethnic composition, has broad representation of the major languagegroups in Asia, making it a good base for developing DAB and DTV multi-lingual services, receivers and display sets. With some localisation andfine-tuning, products and services that succeed in Singapore are likely tobe equally well-received in other Asian markets. In addition to usingSingapore as a regional test-bed, Japanese firms could also useSingapore as a regional manufacturing and marketing base of DAB andDTV consumer electronics and broadcasting equipment.

142. The relevant authorities of Japan and Singapore decided on a JointStudy of Digital Terrestrial Broadcasting Systems and MultimediaServices in February 1998, under which field trials for the Japanese ISDB-T standard were conducted in Singapore. The study will be completed atthe end of 2000. The Joint Study Group suggested that the study couldbe renewed thereafter to continue the exchange of information on thedevelopment of Digital Broadcasting Technology.

Broadcast Programming

143. Japanese programmes have a good following in Singapore and theregion. To promote a wider audience base, the Joint Study Groupsuggested that, taking the opinions of private sector into account, bothcountries could exchange views on a framework to promote activities of


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the private sector in the production and distribution of content fortelevision and other delivery platforms such as the Internet. Suchactivities on a voluntary basis could deepen cultural and economicexchanges between Japan and Singapore.

144. The Joint Study Group noted that one of the concrete areas ofcooperation would be in current affairs and news broadcasting to theregion. Singapore’s news and information channel, Channel NewsAsia(CNA) could partner NHK as the former plans to go regional this year.There could be several levels of cooperation, as follows.

a. CNA could screen NHK-produced programmes, obtainedthrough acquisition or bilateral programme exchanges. CNAalready has close working relations with NHK under theauspices of Asiavision in the daily news exchange. Asiavisionis the news production and coordination arm of the AsiaPacific Broadcasting Union;

b. CNA could also jointly produce lifestyle/current affairsprogrammes with NHK; and

c. CNA could go into a broader business deal with NHK.

TOURISM

145. The global tourism sector has largely weathered the Asian financialcrisis, mainly due to the economic strength of the North American andEuropean regions. According to the World Tourism and Travel Council,travel and tourism are expected to generate some $3.5 trillion of GDP andalmost 200 million jobs across the world economy in 1999. Approximatelyone third of this comes from the industry itself and the remainder from itsvery strong catalytic flow-through effect in other sectors such as retail andconstruction.

146. Southeast Asia’s travel and tourism sector was hit badly by thefinancial crisis in late 1997 and 1998 and grew by only 0.8% (down fromprevious double-digit growth rates) Travel and tourism demand isexpected to post its first real gain in 2000. The economic recovery in theregion has also helped boost visitor arrivals into Singapore to almost 7million in 1999, a robust 11% growth over the previous year. Arrivals fromJapan accounted for 12.4% of total visitor arrivals in Singapore.

147. The economic importance of travel and tourism cannot beoverstated. In 1999, it generated, directly and indirectly, across theSoutheast Asian countries:


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a. 10.6% of GDP;

b. 15.3 million jobs; and

c. 7.3% of total employment;

148. Looking forward, the travel and tourism industry is expected togenerate 4.7 million new jobs per year across Southeast Asian countriesuntil 2010. This would account for 12.5% of total GDP and 8.2% of totalemployment.

149. Given this positive outlook, the Joint Study Group has assessedthat there are numerous opportunities for Japan and Singapore to activelydevelop tourism in the region through win-win partnerships and tocapitalise on the upswing in the regional tourism and travel market.

Promoting Regional Tourism

150. Specifically, the Joint Study Group agreed that the Japan NationalTourist Organisation (JNTO) and the Singapore Tourism Board (STB)could explore the possibility of:

a. joint promotion to increase inbound visitors to each country;and

b. linkage between the websites of JNTO and STB.

151. The Joint Study Group noted that in the interest of consumers andthe tourism industry, it would be important and useful for Japan andSingapore to:

a. jointly identify new tourist destinations in the region for jointmarketing and promotion; and

b. facilitate international investments in tourism developmentsand related infrastructure projects in these regionaldestinations.

Twinning Agreement

152. The Joint Study Group also agreed that there is scope forcooperation at the bilateral level, even though our tourism links arealready excellent. In particular, both countries could explore thepossibility of concluding a twinning agreement between Japan’s GinzaStreet and Singapore’s Orchard Road.

153. The twinning agreement will promote the image of the respectiveshopping areas through a programme for business, cultural and other


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forms of cooperation and exchanges between them. Under theagreement, the designated parties of both countries shall actively:

a. promote the image of the Twinning Streets by organising andstaging activities along or in the close vicinity of the TwinningStreets;

b. facilitate contacts and enhance friendship between themthrough business, cultural and technical exchanges, visits andstudy trips undertaken between their respective personnel;and

c. explore opportunities for cooperation in any other area whichis of mutual interest to the parties.

154. Either party, at its own cost, should organise and stage activitiesalong or in the vicinity of the Twinning Street during a certain period of theyear in consultation and coordination with the other party and is solelyentitled to all revenue generated from or in connection with such activities.

TRANSPORT

155. The Joint Study Group recognised that there already existedexcellent bilateral transport links and that such links play an important rolein promoting their economic development and deepening their relationship.

156. The Joint Study Group took note of the necessity to continue theexisting cooperative relationship with a view to facilitating the movementof goods and people between the two countries.

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III. CONSULTATION AND DISPUTE SETTLEMENT

CONSULTATIONS

157. The Joint Study Group agreed that the JSEPA should establish aconsultation mechanism under which both governments should maintainregular and frequent consultations to agree on the interpretation andapplication of the JSEPA, and to ensure close collaboration to bring aboutmutually satisfactory resolutions of any matters affecting the fulfilment ofbilateral cooperations.

158. The Joint Study Group agreed that the above consultationmechanism should also work as a vehicle for both governments toconsider how to keep upgrading the JSEPA as well as to encourage eachother to take appropriate measures which will lead to the significantimprovement of business environment between the two countries.

DISPUTE SETTLEMENT

159. The Joint Study Group agreed that Government-to-Governmentdispute settlement procedures would have to be established as part of theJSEPA to resolve disputes concerning the interpretation and application ofthe Agreement.

160. In addition, the Joint Study Group recognised that it would be usefulto have a mechanism that provides for the speedy, amicable and fairsettlement of commercial disputes involving business entities from Japanand Singapore. In this regard, the Joint Study Group agreed that bothcountries should promote the awareness of and access to the use ofAlternative Dispute Resolution (ADR) mechanisms of mediation andarbitration within the mainstream legal frameworks of both nations,through the collaborative efforts of the Japan Commercial ArbitrationAssociation (JCAA), the Japan Shipping Exchange, Inc. (JSE) and otherADR organisations in Japan, and the Singapore Mediation Centre (SMC)and the Singapore International Arbitration Centre (SIAC) in Singapore.17

17 (1) The Japan Commercial Arbitration Association (JCAA) is a non-profit organisation

established in 1953 to promote resolution of disputes arising from international anddomestic business transactions through arbitration, conciliation and mediation. It hasabout 870 members, including all industries.

(2) The Japan Shipping Exchange, Inc. (JSE) was established as a corporation in 1921and restructured as a non-profit organisation in 1933. It has about 390 members,


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161. The Joint Study Group noted that the JCAA and SIAC haveconcluded a MOU, while the JCAA and SMC are considering a MOU.The Joint Study Group encouraged these organisations to cooperate inthe following areas in accordance with these MOUs:

a. the provision of mediation and arbitration services;

b. the provision of training in negotiation and mediation skills (inthe case of the SMC) and arbitration skills (in the case of theSIAC);

c. the provision of consultancy services for dispute avoidance,dispute management and ADR mechanisms; and

d. the provision of facilities for arbitration hearing (subject toagreement for reimbursement of fees & expenses) andassistance in selecting and appointing suitable arbitrators inappropriate cases.

----------

including companies involved in shipping, warehousing, accident insurance, insuranceof shipowners’ liability and finance. Under the rules of maritime arbitration of the JSE,JSE arbitrates the dispute of agreements and damages in collision between two ships.

(3) The Singapore Mediation Centre (SMC) is a non-profit organisation established in1997 to provide Singapore and Asia with commercial mediation services. Its servicesinclude:

a. the provision of mediation and other ADR services;

b. the provision of facilities for negotiation, mediation and other forms of ADR;

c. the provision of training in negotiation and mediation skills;

d. the accreditation and maintenance of a panel of mediators;

e. the provision of consultancy services for dispute avoidance, dispute managementand ADR mechanisms; and

f. the promotion of mediation and other ADR services.

(4) The Singapore International Arbitration Centre (SIAC) was established in 1991, andhas adopted a set of arbitration rules developed by the United Nations Commission onInternational Trade Law.

A1-1

Annex 1

ELECTRONIC TRADE DOCUMENT EXCHANGE SYSTEM

1. To facilitate seamless and secured trade-related information anddocument flow between importers and exporters of Japan and Singapore,the Joint Study Group has agreed that Japan and Singapore shouldestablish an Electronic Trade Document Exchange System (ETDES).

CURRENT SITUATION

2. Currently, the typical information and documents flow between say,a Singapore exporter and its Japanese importer(s), is as follows. First,the Singapore exporter or its agent (e.g. freight forwarder) will apply to therelevant authorities in Singapore for clearance to export its products toJapan. It will then send the relevant information and documents18

pertaining to this export of products to its Japanese importer(s), usuallyvia e-mail, facsimile transmission or courier service. The Japaneseimporter(s) will make use of the information and documents sent by theSingapore exporter and separately apply to the relevant authorities inJapan for import clearance.

BENEFITS OF THE ETDES

3. The ETDES will benefit importers and exporters in three aspects:

a. Speed. Compared to courier/facsimile, an electronic systemwill provide a more timely and efficient mode of transfer,since information/documents do not have to be duplicatedand forwarded to multiple importers.

b. Cost. It will also reduce the cost of despatching theinformation/documents by courier to the importers.

c. Security. Companies that are currently already transmittingtheir trade-related information/documents by e-mail to theiroverseas buyers can also expect to gain in terms of greatersecurity. Specifically, security features that ensure theconfidentiality and integrity of the documents or informationexchanged can be incorporated.

18 Some examples of such trade documents are commercial invoices, packing lists,insurance certificates, bills of lading, airway bills, etc.

A1-2

FEATURES OF THE ETDES

4. To implement the ETDES, the Joint Study Group has agreed thatJapan and Singapore should set up document exchange servers in theirrespective countries. The document exchange server(s) are meant fortraders, if they so wish, to deposit all the necessary information anddocuments pertaining to a particularly trade transaction. Theseinformation and documents will then be electronically channelled to therelevant parties, as authorised by the traders. Please refer to diagrambelow for a schematic representation of the proposed linkage via theETDES.

5. The Joint Study Group has agreed on the salient features of thedocument exchange servers, which are as follows.

a. They should operate on a commercial basis. Specialisedprivate entities with the requisite expertise can provide fasterand more effective deliverance of the system. In addition, asystem thus developed is likely to be more commerciallyviable and more attuned to the needs of the businesscommunity.

b. They should contain sufficient safeguards so as to ensureconfidentiality and integrity of information transmittedbetween the document exchange servers. In this respect,there is a need to provide for cross-certification of electroniccertificates/signatures accompanying the electronic tradedocuments to ascertain the identity of the originator of thesedocuments.

c. The document exchange servers should also be recognisedby the relevant bodies in both countries. Recognition willensure the integrity and confidentiality ofinformation/documents exchanged under the system. In thisway, an importer that receives information/documents from itsexporter can be assured that the information/documents havenot been tampered with.

ACTION PLAN

6. To implement the ETDES, the Joint Study Group has agreed thatJapan and Singapore should encourage cooperation between the relevantparties of both countries in the areas outlined below:

a. invite private entities to provide the document exchangeservice, for example, through tenders;

A1-3

b. develop the appropriate ICT infrastructure that will ensureinter-operability and secure transmission ofinformation/documents;19

c. develop recognised documents exchange servers that willcater to the needs of the importers/exporters. To this end, thedocument exchange servers should have the followingfeatures:

i. a system to register and confirm the identification of theusers (i.e. importers and exporters or their agents) ofthe document exchange servers. Only approved andregistered users will be allowed to deposit and transmitinformation/documents through the document exchangeservers;

ii. a process to authenticate the digital signatures ofapproved users;

iii. a verification mechanism to ensure that the electronicdocuments are deposited or transmitted uponauthorisation by the user;

iv. a system to monitor and track the trail and revisionhistory of the electronic documents; 20 and

v. an audit system to ensure that the aboveprocedures/safeguards are fully complied with andfunctioning effectively;

d. establish a framework to provide the appropriate legal statusto the document exchange servers and its content, as well asto govern the obligations and liabilities assumed by thegovernment bodies, the document exchange server serviceproviders and the users. The Joint Study Group agreed onthe need to create three tiers of legal relations:

i. a binding legal relationship between users and thedocument exchange server service providers;

ii. a binding legal relationship between the documentexchange server service providers of Japan andSingapore; and

19 Interoperability can be achieved via the Internet, lease-line or other value-added

networks.20 That is where the documents have been sent to and received from.

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iii. adherence to national legislation or internationalcodes/practice covering general areas of electroniccommerce such as digital signature and admission ofelectronic documents as valid documents;

e. develop cross certification of electronic certificates andsignatures. One possibility is for the two governments todevelop this through having a Public Key Infrastructure (PKI)interoperability arrangement that would allow cross-recognition by the certifying authorities of each country;

f. explore the feasibility of having a facility for the information inETDES to be compiled as a value-added service to the users;and

g. assess the commercial needs for users to transmit the bill oflading electronically.

Both sides are confident that once the above areas are implemented, theETDES will be ready to be put into operation by the relevant privateentities.

A1-5

Schematic Representation of the Proposed ETDESbetween Japan and Singapore

----------

SingaporeImporters &Exporters

Singapore TDB/CustomsAuthority

& ControllingAgencies

DocumentExchangeServer(s)

(inSingapore)

JapanImporters &Exporters

DocumentExchangeServer(s)(in Japan)

JapanCustomsAuthority

& ControllingAgencies

A2-1

Annex 2

POSSIBLE BILATERAL COOPERATION INITIATIVESFOR FINANCIAL SERVICES

REGULATORY COOPERATION

1. Globalisation and the emergence of the Internet as an alternativechannel for financial transactions challenge traditional regulatory conceptsof jurisdiction and investor protection. In addition, regulators must meetthe need both for implementing sound prudential policy and formaintaining an environment that does not stifle legitimate marketinnovations. Closer regulatory cooperation between national regulatorscan help regulators cope with these new challenges. This will improvemutual understanding of the respective regulatory regimes. Regulatorswould also be able to work together in various areas, including theoversight of global financial institutions with a view to minimising systemicrisks and limiting contagion effects in the event of a crisis. Anotherimportant benefit of regulatory cooperation is that residents of bothcountries will become more confident about Internet financial transactionswith the other country.

2. The Joint Study Group agreed that regular bilateral meetings toexchange views and share experiences on market trends and regulatorydevelopments would be valuable. Also considered were exchangeprogrammes to foster closer relations. In relation to supervisory issuesarising from financial services transactions over the Internet, the regularbilateral meetings could consider issues such as:

a. review of the existing regulatory framework for financialservice providers that have no physical presence in eachcountry’s jurisdiction;

b. review of requirements for admission and operatingstandards for financial service providers operating over theInternet;

c. enhancing security of Internet financial transactions;

d. use of the Internet to foster investor education andtransparency; and

e. cooperation in supervision of financial service providersoperating over the Internet, and in surveillance of Internetfinancial transactions.

A2-2

3. The Joint Study Group also supported the initiatives by variousregulatory agencies to undertake Memoranda of Understanding (MOUs).These MOUs will formalise regulatory cooperation, covering issues suchas mutual assistance and the exchange of information necessary forsupervision of financial transactions.

COOPERATION IN CAPITAL MARKET DEVELOPMENT

4. Technology has created a more competitive environment for globalcapital markets. For example, the increasingly global orientation ofinvestors has intensified competition amongst leading equity andderivatives exchanges. This has led to strategic alliances of key playersin capital markets, aimed at enhancing the depth and liquidity of theirmarkets, thus safeguarding their competitive position. In addition,traditional bourses also have to compete with new non-traditional playerssuch as electronic communication networks (ECNs) or informationproviders. Asian capital markets face the same challenges and mustimprove their competitive position or risk losing even theirdomestic/regional investors.

5. The Joint Study Group welcomes the recent agreement betweenthe stock exchanges of both countries to strengthen cooperation, andrecommends that Japan and Singapore encourage closer cooperationbetween our respective capital markets to ensure that our markets remaincompetitive and attractive. The relevant authorities in both countries canwork together to facilitate such cooperation by promoting the developmentof a conducive market infrastructure and regulatory environment. Someideas discussed in this context were the following:

Capital Market Linkages

6. The linkage of Japanese and Singapore capital markets can help topool liquidity of both markets. With a larger combined market, there is agreater scope to develop and promote new and innovative financialproducts. The possibility of cross-trading financial products listed in bothcountries may provide another investment opportunity for domestic as wellas regional and international investors.

7. The development of a co-trading linkage may also enhance marketefficiency and lower trading costs for investors. It provides financialinstitutions and investors with direct access to financial instruments tradedin both markets, which lowers the costs of cross-border trading. Thiscould in turn encourage greater cross-border trading, thus boostingliquidity in both markets.

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Improving Market Infrastructure

8. To help develop broader and deeper capital markets that areglobally competitive, we must ensure that the supporting marketinfrastructure is efficient and reliable. Where government leadership isdesirable and possible, Japan and Singapore can co-operate to improvemarket infrastructure.

9. The Joint Study Group discussed cross-border clearing andsettlement linkages as an area of possible cooperation. Bilateralcollaboration in this area would not only benefit both countries, but alsocontribute to the overall safety and stability of the regional and worldmarkets.

10. Three types of linkages were raised in the discussions. First, forthe clearing of securities: a linkage between the central securitiesdepositories of both countries will enable investors to settle their cross-border trades through existing facilities. Second, for the clearing of highvalue interbank funds transfers: a linkage between the Real-Time GrossSettlement (RTGS) systems of Japan and Singapore will help to minimizethe foreign exchange settlement risks. Third, for the clearing of cross-border retail payments, an Asian Regional Clearing Mechanism or alinkage between the Automated Clearing Houses of Japan and Singaporewill help speed up and reduce the cost of intra-regional payments flow.

11. Other possible areas of collaboration raised in the discussionsinclude the area of retail payment instruments (e.g. development of aMulti-Purpose Stored Value Card that can be used in either country) andthe enhancement of existing cheque clearing facilities such as chequetruncation which uses electronic images of cheques during the paymentprocess.

Bond Market Development

12. An integral part of developing competitive capital markets is thedevelopment of deep and liquid bond markets in Asia. This will mobilisedomestic savings for longer-term financing needs of Asian countries,reducing the reliance on short-term bank borrowing. It will also provide analternative investment venue for international investors looking for greaterrisk diversification across geographical regions. Global fund managersseeking a better risk-return mix can turn to Asian bond markets.

13. The Joint Study Group sees it as important that Japan andSingapore cooperate to bring together issuers and investors. An exampleof such cooperation raised by the Joint Study Group was that marketparticipants of both countries hold joint promotion or road shows toincrease awareness of Asia as a debt market among global issuers and

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investors. The two countries could also co-operate in facilitating cross-border bond trading by improving market infrastructure, including clearingand settlement systems.

CO-INVESTMENT COOPERATION

14. The Asian financial crisis has revealed the structural vulnerabilitiesof Asia’s corporate sector in its heavy reliance on bank borrowing.Sustainable recovery of the corporate sector on a solid foundation willrequire equity finance, which is still scarce in the region. The Joint StudyGroup explored the importance of Japan-Singapore cooperation topromote and complement equity investment in the region. Thegovernments of both countries could consider co-investment in the regionthrough equity finance between their agencies and with other strategicbusiness partners.

15. The Joint Study Group recommended further consideration of co-investment cooperation between the appropriate agencies of Japan andSingapore.21

PROMOTING MONETARY AND FINANCIAL STABILITY AND THEINTERNATIONALISATION OF THE YEN

16. The Joint Study Group sees it as important that Japan andSingapore cooperate to contribute to regional and international financialstability.

17. From this point of view, the Joint Study Group would welcome anenhanced role of the yen and noted that several of the proposed areas forbilateral financial cooperation could lead to the increasedinternationalisation of the yen. The Joint Study Group recommendedfurther consideration of these proposals for this purpose, and to facilitateand encourage trade and investment between Japan and Singapore.

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21 A private sector member from the Japanese side suggested his personal ideas for the

investment initiative. (See Appendix.)

Appendix-1

Appendix

JOINT INVESTMENT INITIATIVE FOR JAPAN AND SINGAPOREBy Hajime Shinohara

Background of the Initiative

1. The Asian monetary crisis dealt a serious blow to the Asianeconomy, resulting in many countries in the region experiencing asubstantial drop in economic growth rates in 1998. However, since 1999,all of these economies have recorded positive growth rates in real terms,albeit at a different pace of recovery. Factors responsible for such aneconomic recovery include trade expansion, the implementation ofappropriate fiscal and monetary policies as well as reforms made in thefinancial and corporate sectors, among others.

2. These Asian countries have taken specific measures to stabilisetheir financial systems. These include creating agencies to settle non-performing assets, revising the legal system, promoting capital increasesor realignments of financial institutions and closing or nationalising bankswhose reconstruction is deemed impossible. Consequently, theincreasing trend of non-performing assets has generally been arrestedand the total level is diminishing in many countries. However, theoutstanding level of loans made by financial institutions in these countrieshas also continued to diminish, and this has become a factor deterringrecovery in production. The restoration of financial institutions' function tointermediate financing is crucial in order to restore the Asian economy toa stable growth path. But there are too many issues to be solved, andthese are feared as potential obstacles to the full-scale recovery of thereal economy.

3. Frameworks are being set up in these Asian countries to helprestructuring private corporate debts. However, fundamental solutionsare required, including securing transparency in corporate finance throughestablishing better accounting systems, ensuring the effectiveness ofbankruptcy law and strengthening the capability of banks that are the maincreditors.

4. In addition, the main feature of the Asian financial systems is thehigh level of reliance on indirect financing. As the last monetary crisisshowed, a financial system that is overly reliant on indirect financing isvulnerable at times of monetary crisis. In Asia, indirect financing isperceived to continue an important role in supplying capital to foster baseindustries providing basic technology, but diversification of channels forsupplying capital is desirable to minimise the adverse effects of crises.

Appendix-2

Basic Concept

5. Recovery of the private sector is indispensable to a full-scalerecovery of the Asian economy along with the implementation ofeconomic reforms by the governments in the region. In particular,activating the basic industries would sustain the economic growth of thesecountries, and provide a foundation for more stable economic growth inthe future. Moreover, fostering of new industries by utilising advancedtechnology, such as IT and biotechnology is also necessary to furtherupgrade the economies of the region. Asian countries should endeavourto create an environment to encourage the private sector if theseeconomies are to be competitive in the market economy.

6. From such a perspective, it would be very significant for Japan andSingapore, which have the capacity to supply capital to these Asiancountries, to jointly take an initiative to activate the private sector in Asia.In view of the financial sector reforms being undertaken in each country, itwill be essential to establish a scheme with the co-operation of the twocountries to provide direct financing in the form of equity finance to privatecompanies that require capital. This initiative should also aim in the futureto mobilise capital in the region, with the scheme serving as the core ofsuch financial transactions.

7. Noting the view that providing public funds to private corporations isin effect subsidising them and that it could distort the market mechanism,it will be necessary to establish a principle that private corporations towhich such capital is provided must be profitable on a commercial basis.Moreover, in order to prevent any adverse effects on the corporaterestructuring efforts, such corporations practising good governance,including improved corporate financing and transparency should beselected.

Specific Steps of Joint Investment

8. Based on the present economic situation in Asia and the concept ofjoint investment, the proposed ideas described below are identified asspecific steps for the joint investment to be made by Japan and Singapore.

9. Further discussions by those concerned in both the government andprivate sector of the two countries are expected to formulate the structureof the proposed joint investment.

Objectives

10. Government agencies in Asia, centring on Japan and Singapore,will mobilise private sector equity funds that are required to activate theprivate sector in the region.

Appendix-3

11. By promoting private equity investment, equity financing supplychannels in the region should be diversified to complement directfinancing markets that are still in the developing stage.

12. In cooperation with the government and government agencies of thecountries in the region, the scheme will contribute to the promotion ofprivate equity investment, improve corporate governance and upgradefinancial and investment technological capability.

13. Simultaneously, the scheme will also assist in creating systems fortechnical cooperation and intellectual support in important policyinvestment areas, such as infrastructure in the private sector, corporaterestructuring and advanced technology including IT, environment etc.

14. In these important policy investment areas, the scheme will provideinvestment opportunities to private investors from both within and outsidethe region in such good investment projects with a high degree ofcommercial success.

15. The scheme will also provide diverse good investment opportunitiesto pension funds in Asia, which are expected to grow.

Framework for the Joint Investment Initiative

16. In order to provide flexible opportunities in diverse investment areasand projects, multiple joint investment projects, which are suitable toindividual investment areas and projects, will be implemented under thecomprehensive framework of the joint investment initiative.

17. Although joint investment will be made in investment areas andprojects that match the policy objective of the comprehensive framework,the government agency that undertakes the investment will be responsiblefor individual project organisation and investment judgement.

18. The role of government agencies in joint investment projects will bein complementing and encouraging private investment, with the objectiveof carrying out a catalysing function, such as co-ordination with the partiesconcerned (including governments) and controlling political risk as well asproviding collaboration with technical co-operation and intellectual support.

19. Although the initiative will centre on Japan and Singapore, the doorwill be widely open to other countries in the region, and their participationand co-operation in joint investment projects will be invited.

20. As a specific measure of co-operation, investment areas will beselected from those of policy importance to Japan and Singapore, theexpertise of the implementing government agency, and Asian regionalneeds. Consideration will be given to establishing plural equity funds

Appendix-4

specialising in individual fields.

21. In addition, the establishment of a fund to guarantee the activationof the regional bond market as well as implementing joint directinvestment to projects, strategically important to both countries, will alsobe considered.

Investment Areas

22. Investment projects to be covered will be good projects in the Asianregion, which have high policy importance to both Japan and Singapore.

23. ln selecting the investment projects, only those profitable projectsthat can promise sufficient returns and mobilise private investment will beconsidered.

24. Investment areas will be limited to: (a) co-ordination amongconcerned parties (including participating governments); (b) identificationof potentially profitable investment projects; (c) collaboration with otherpublic support schemes, including technical co-operation and intellectualsupport; (d) controlling political risk; and (e) areas requiring investment bygovernment agencies from the viewpoint of enlightening investors.

25. Investment is anticipated in the following areas.

a. private sector infrastructure projects such as power,telecommunication, transport, water, etc. that would improveinfrastructure in the region, privatisation projects of statecorporations and public enterprises;

b. resource-development projects and related infrastructureprojects that would help with the stable supply of energy inthe region;

c. restructuring of corporations (including small- and medium-size companies) that are important in terms of industrialpolicy and have potentials for growth;

d. venture businesses for commercialising advanced technology,such as IT and biotechnology; and

e. energy efficient projects and environmental improvementprojects with high commercial values that would help inimproving the regional environment.

Basic Principles of Equity Funds

26. Funds will be created by capital contribution through the

Appendix-5

cooperation of the public sector (government agencies etc. of Japan andSingapore) and the private sector (institutional investors both within andoutside the region, pension funds, Asian corporations, etc.) but the capitalshare of the public sector will be within the scope required for thecatalysing function.

27. Participation of governments and government agencies in theregion, other than Japan and Singapore, will be widely sought.

28. Fund mangers and advisors, who will assume identification,evaluation, inspection and management of projects, should beinternationally first-class professionals with a high degree of expertise,and investment will be done on a commercial basis.

29. In order to ensure conformity with policy objectives and to minimiserisks, fund mangers will invest in accordance with investment guidelinessetting limits on operations relating to investment areas, countries andprojects.

30. In addition to the investment activity, the funds are interested toimprove the investment environment, advise on upgrading the corporategovernance of projects and transfer the latest financial and investmenttechnologies to participating investors.

31. While government agencies participating in the funds will not beinvolved with the daily management of the respective funds, they willsupport the funds by formulating the basic management policy, negotiatewith the host government on improving the respective investmentenvironment and provide deal flows on good investment projects.

32. The participating government agencies will also support the activityof the funds by assisting in setting up schemes to provide technicalcooperation and intellectual support in these investment areas.

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SECTION THREE

BENEFITS OF THE JSEPA

SECTION THREE – BENEFITS OF THE JSEPA

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1. Section Two described the possible scope of the JSEPA andelaborated on the benefits that could be derived from the proposedinitiatives under the JSEPA. This section sums up the broader strategicand economic considerations for, and benefits of the JSEPA.

STRENGTHENING EXISTING TIES

2. Japan and Singapore share strong economic ties.

a. In 1999, Japan was Singapore’s third largest trading partnerwhilst Singapore was Japan’s ninth largest. Since the 1980s,Japan has consistently been one of Singapore’s top threetrading partners.

b. Singapore provides a base for Japanese companies goinginto the Southeast Asian markets. Today, Japanesecumulative investment in Singapore exceeds S$20 billion.Singapore is also home to more than 1,500 Japanesecompanies and 26,000 Japanese expatriates.

c. Both countries are active participants of major economicorganisations and fora such as the WTO and APEC. Inparticular, we have been working together towards the launchof a New Round of multilateral trade negotiations at the WTO.

Table 1: Singapore’s External Trade1

　 1999 (S$ thousand)　　Export Import

1 United States 37,214,764 United States 32,044,1952 Malaysia 32,163,680 Japan 31,324,7323 Hong Kong, China 14,915,223 Malaysia 29,282,9944 Japan 14,420,742 China, PR 9,648,8695 Chinese Taipei 9,477,271 Thailand 8,889,4456 Thailand 8,535,940 Chinese Taipei 7,540,2437 United Kingdom 7,246,824 Korea 7,063,4468 China, PR 6,642,732 Germany 6,111,3819 Netherlands 6,536,492 Saudi Arabia 5,535,732

10 Korea 6,027,265 Hong Kong, China 5,400,23511 Germany 5,521,675 Philippines 4,974,13512 Australia 5,373,351 United Kingdom 4,622,97513 Philippines 4,795,026 France 4,397,25114 India 4,243,316 Switzerland 2,892,85415 France 3,708,806 Australia 2,464,018

1 Source: Official Statistics, Singapore


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Table 2: Japan’s Trade Relationship2

　 1999 (¥ million)　 Export Import1 United States 14,605,315 United States 7,639,5102 Chinese Taipei 3,276,252 China, PR 4,875,3853 China, PR 2,657,428 Korea 1,824,2864 Korea 2,606,234 Australia 1,456,9955 Hong Kong, China 2,507,213 Chinese Taipei 1,455,9156 Germany 2,121,636 Indonesia 1,429,0027 Singapore 1,854,167 Germany 1,307,0348 United Kingdom 1,616,321 Malaysia 1,241,3909 Netherlands 1,367,273 Thailand 1,008,226

10 Thailand 1,284,801 United Arab Emirates 1,001,01211 Malaysia 1,264,899 Saudi Arabia 944,32912 Philippines 996,864 Canada 900,25513 Australia 961,664 France 699,01014 France 775,761 United Kingdom 674,11115 Panama 775,249 Singapore 618,188

Table 3: Japan's Outward and Inward Direct Investment3

Stock of Direct Investment (US$ million)Outward (end of 1998) Inward (end of 1998)

1 United States 111,109 1 United States 14,6532 United Kingdom 24,801 2 Germany 2,0233 China, PR 17,912 3 Switzerland 1,5534 Indonesia 11,543 4 Netherlands 1,3855 Singapore 9,495 5 United Kingdom 1,3676 Netherlands 9,283 6 Chinese Taipei 1,2467 Hong Kong, China 9,212 7 Hong Kong, China 8548 Australia 5,299 8 Canada 6689 Thailand 4,711 9 France 338

10 Brazil 5,299 10 Sweden 30911 Germany 4,711 11 Singapore 22912 Malaysia 4,438 12 Australia 178

3. Both countries also enjoy strong political relations, with regularexchange of visits between our political leaders and officials. Theserelations were enhanced during the Asian financial crisis when Japan andSingapore worked closely to help restore economic stability in the region.Both countries actively explored ways to jointly extend financialassistance and other support to countries affected by the crisis.

4. The frequency of consultation between our political leaders andofficials has increased significantly since the Asian financial crisis. Thismomentum continues today. Japanese delegations visiting the region

2 Source: Official Statistics, Japan3 Source: JETRO: "JETRO Foreign Investment Report 2000"


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have made it a point to include Singapore in their itinerary to exchangeviews with Singapore leaders on regional developments.

5. The JSEPA would entrench our close ties and build further uponthem. It is a natural development of our bilateral relationship.

CREATING NEW OPPORTUNITIES

6. The JSEPA is, however, not only about strengthening existing tiesbetween Japan and Singapore. The JSEPA, as envisaged in thepreceding section of this report, also explores areas of economicliberalisation, facilitation and cooperation which would be mutuallybeneficial and which would create new opportunities for both countries.The integration of the Japanese and Singapore markets and relatedcooperation in new growth sectors would not only create larger markets,but new markets as well. This would in turn offer more wide-rangingchoices for consumers in Japan and Singapore. It would alsoinstitutionalise regulatory reforms in both countries, enabling Japan andSingapore to stay attractive to capital and talent.

7. In particular, because Japan and Singapore are among the moredeveloped economies in Asia, and are at roughly similar levels ofeconomic development (Tables 4 and 5), the JSEPA would easily enableboth countries to exploit new opportunities arising from the rapiddevelopment of information and communications technology, the Internetand electronic commerce. It would allow both countries to take aleadership role in Asia in these sectors.

Table 4: GNP per capita in 1998 (US$)4

1 Luxembourg 45,100 11 Sweden 25,5802 Switzerland 39,980 12 Belgium 25,3803 Norway 34,310 13 Netherlands 24,7804 Denmark 33,040 14 Finland 24,2805 Japan 32,350 15 France 24,2106 Singapore 30,170 16 Hong Kong, China 23,6607 United States 29,240 17 United Kingdom 21,4108 Iceland 27,830 18 Australia 20,6409 Austria 26,830 19 Italy 20,090

10 Germany 26,570 20 Canada 19,170

4 Source: World Bank: "World Bank Atlas 2000"


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Table 5: Science and technology indicators

Number ofresearchers,scientistsandengineers5

Per10,000workers

Grossexpenditureon R&D6

%GDP

Connectionto Internet7

No. ofhostsper 1000people

Japan 111.1 Japan 3.1 Singapore 22.19ChineseTaipei

87.2 Korea 2.6 ChineseTaipei

20.04

Singapore 65.5 ChineseTaipei

2.0 Japan 16.65

Korea 62.3 Singapore 1.8 Korea 6.03Malaysia 10.2 Malaysia 0.2 Malaysia 2.80Philippines 3.8 Thailand 0.2 Thailand 0.49Indonesia 2.8 Indonesia 0.2 Philippines 0.23Thailand 2.1 Philippines 0.1 Indonesia 0.18

8. The Joint Study Group also recognised that bilateral economicintegration under the JSEPA would reduce business costs and promotecompetition, thereby improving economic efficiency and consumerwelfare. It would enhance the attractiveness and vibrancy of our markets,and invite greater investments. It would lead to trade expansion not onlybetween the two countries but also at the regional and global levels.

9. Broadly, the JSEPA seeks to create these new opportunitiesthrough (i) liberalisation, (ii) facilitation, and (iii) cooperation.

Liberalisation

10. Given that Japan and Singapore already maintain low tariff regimes,expansion of trade in goods through tariff liberalisation would be modest,as with other recent FTAs, including NAFTA.

11. However, the JSEPA would go beyond tariff liberalisation. Its focuswould be more encompassing, including the lowering of unnecessarybarriers to trade and freer movement of goods, services, investment,information and people. These benefits, though difficult to quantifythrough macro-economic model analyses, would be sizeable and wouldsubstantially improve economic welfare in both countries.

5 Official sources6 Official sources7 Source: “World Competitiveness Yearbook 2000”


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12. In particular, considerable trade expansion can be expected frombilateral liberalisation in a broad range of pivotal services sectors.Services constitute a vital component of Japan’s and Singapore’seconomies. Mobility of people and liberalisation of professional serviceswould also contribute to significant trade expansion between the twocountries.

13. Investment is another area which the JSEPA would address.Notwithstanding the fact that the two countries already have an open andliberal investment regime, the establishment of a legal frameworkgoverning the rights and obligations of the Japanese and Singaporegovernments and investors would further improve the investingenvironment.

Facilitation

14. The harmonisation and convergence of rules, standards,procedures and business practices of both countries under the JSEPAwould afford. They would greatly facilitate bilateral trade and greaterconvenience and certainty to the private sector investments. In particular,the JSEPA would endeavour to put in place a WTO-plus model, ahead ofthe current developments in the multilateral trading system, forharmonising regulations and procedures pertaining to e-commerce,customs clearance, product testing and certification, settlement ofcommercial disputes and competition policy.

15. Electronic commerce is an increasingly important and integral partof our economies. Benefits arising from advances in and the use ofelectronic commerce are expected to permeate throughout botheconomies. The development of common rules for protecting privatedata, using electronic signatures and contracts, enforcing againstcomputer crimes etc, would not only help markets function better butwould facilitate the development of new businesses. This in turn wouldbolster economic growth and promote technological innovation in Japanand Singapore. Furthermore, the bilateral harmonisation of standards ine-commerce under the JSEPA would be a positive step towards thecreation of new regional and global standards in this area.

16. The introduction of an electronic system for customs proceduresand the transfer of trade documents between importers and exporters inJapan and Singapore would enable faster processing of import andexport formalities, and lead to substantial reduction in business costs.

17. Establishing mutual recognition agreements would facilitatebilateral trade between Japan and Singapore. First, it would removeduplicative testing and certification procedures and thus shorten the time


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needed for products to reach the markets. Secondly, it would lead to theharmonisation of standards of products, thereby improving the efficiencyof industrial production. This would translate into reduced business costsand increased consumer welfare for both countries.

18. The setting up of alternative dispute resolution mechanisms wouldaid businesses in settling their disputes in a more efficient and cost-effective manner.

19. Besides adding to the increased transparency and clarity of thebusiness environment, a framework on competition policy would also helpto deal with anti-competitive practices that may adversely affect tradebetween the two countries.

20. These are but some examples of trade and investment facilitationinitiatives under the JSEPA that could bring significant benefits to theprivate sectors of Japan and Singapore.

Cooperation

21. Besides liberalisation and facilitation measures, the Joint StudyGroup proposed that the JSEPA also include cooperation initiatives inmany diverse areas such as financial services, information andcommunications technology, science and technology, human capitaldevelopment, media and broadcasting, development of SMEs, tourism,postal services and transport.

22. The financial sector cooperation initiatives proposed under theJSEPA would augment the attraction of Japan's and Singapore's financialmarkets, offering businesses a larger number of fund raising alternatives.Investors would enjoy an improved environment for investments. TheJSEPA would also provide a useful framework for enhanced regulatorycooperation to meet the new challenges posed by emerging marketdevelopments and improve the market infrastructure in both countries.Since Tokyo and Singapore are two major financial centres in the region,the strong ties between the two financial markets would contribute to theestablishment of liquid, sound and reliable financial markets built on fairand transparent rules.

23. Financial markets and institutions can only thrive on confidence.The JSEPA covering financial services trade liberalisation backed byregulatory cooperation helps to build that confidence. The Asian financialcrisis has proved that international capital flows can easily and quickly bereversed if there is loss of confidence. Strengthening the financialsystems of the two countries would be one of the greatest benefits of theJSEPA. The proposed cooperation in the financial sector may also leadto the expansion of the use of the yen in regional and global markets.


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24. In the area of information and communication (infocomms) services,the cooperation initiatives under the JSEPA would serve to enhance thesecurity of the communications infrastructure, improve the legal andregulatory certainty for electronic transactions, ensure effectivemanagement of competition in the infocomms sector and promote thedevelopment of e-Governments. Significantly, these various cooperationinitiatives could serve as a model and spur the growth of e-commerce inthe region.

25. The proposed initiatives in science and technology under theJSEPA are a welcome addition to the ongoing collaboration betweenJapan and Singapore. Joint efforts to develop a robust framework toprotect and promote the use of intellectual property, to identify and investin start-ups in the region, and to undertake research in the life sciences,would enable Japan and Singapore to more effectively leverage on newinnovations.

26. The business communities of Japan and Singapore have had along history of successful economic cooperation. The JSEPA wouldfurther promote business partnerships, especially between Japan andSingapore SMEs and start-ups, which are keen to expand into eachother’s markets and region.

27. The JSEPA would also help to develop the human capital of bothcountries as well as that of regional countries, through joint third countryprogrammes, working holiday schemes, and exchanges betweeneducational institutes, professional bodies and government agencies.

28. Furthermore, the tourism and transport industries of Japan andSingapore would benefit from the proposed initiatives under the JSEPA topromote new tourist destinations in the region and to facilitateinternational investments in tourism projects.

29. It should also be noted that these liberalisation, facilitation andcooperation initiatives would impose greater discipline on thegovernments of Japan and Singapore to reform the less competitiveelements of their economies. They would enable both countries toacquire more rapidly the competencies required in the knowledge-basedeconomy.

STRENGTHENING THE MULTILATERAL TRADING SYSTEM

30. The JSEPA would play a strong complementary role to the effortsof the multilateral trading system, especially in the areas of trade inservices and non-tariff measures. It provides a platform for Japan andSingapore to accelerate beyond current WTO developments and work


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towards conceptual model frameworks, especially for the following areaswhere either there are no rules yet in the WTO or the existing WTO rulescan be further improved upon:

a. electronic commerce;

b. definition of service providers;

c. non-tariff measures;

d. investment;

e. mutual recognition;

f. anti-dumping; and

g. consultation and dispute settlement.

STRENGTHENING JAPAN’S ENGAGEMENT IN SOUTHEAST ASIA

31. The JSEPA would not only have a direct impact on our bilateralrelationship, but would also strengthen Japan’s involvement in andcommitment to Southeast Asia for the long term, to the benefit of bothJapan and the ASEAN countries.

32. Singapore is an integral member of the ASEAN community. ManyJapanese companies use Singapore as the gateway to Southeast Asia.Singapore also serves as a hub and a base for the regional operations ofmany Japanese companies. ASEAN, with a population of about 500million people, would continue to be an important market for Japaneseproducts and services and as a manufacturing base for global sales. TheJSEPA would enable Japan to anchor its foothold in the region andbenefit from the potential of the region in the face of the rapidly changingeconomic environment in Asia. In turn, Singapore’s position as a regionalgoods and services hub would be enhanced.

33. The rest of Southeast Asia would also benefit from Japan’senhanced engagement in the region. Japan has been, and wouldcontinue to be, an important source of investments, capital andtechnology, and a major export market for ASEAN countries. Prior to theAsian financial crisis, Japanese investments contributed significantly tothe growth of regional economies. When the crisis struck, Japan offeredmuch assistance to help the recovery of Southeast Asian countries. Infact, there is positive correlation between the recovery of Japan’sproduction levels and ASEAN’s exports to Japan (which comprisedmainly ICT-related goods and parts), and the recovery of ASEAN’sproduction levels and Japan’s exports of capital goods and parts to


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ASEAN. (See Charts 1 and 2.) These recoveries in production levels andintra-regional trade exerted strong locomotive effects on each other.

34. With the increased competition in the region, Japan’s economicstrength would once again be a source of stability and confidence forASEAN. (See Tables 6-8.)

Table 6: Japan’s Investment into ASEAN-5 (in US$ million) 8

1980 1985 1990 1995 1998ASEAN-5 926 936 4,082 5,538 4,027Indonesia 529 408 1,105 1,605 1,076Malaysia 146 79 725 575 514Philippines 78 61 258 718 379Singapore 140 339 840 1,400 687Thailand 33 48 1,154 1,240 1,371

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Export Volume ofIndustrial Supplies(ASEAN5)

IndustrialProduction (Japan)

Chart 1: Correlation between Japan's Industrial Production and ASEAN-5's Export of Industrial Supplies to Japan (%, Change over previous year)5

8 Source: Institute of Fiscal and Monetary Policy, Ministry of Finance/Financial Statistics

of Japan


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ElectricalMachinery

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PrecisionInstruments

ASEAN-5IndustrialProduction

Chart 2: Correlation between ASEAN-5's Production and Japan'sExport of Parts to ASEAN-5 (%, Change over previous year)6

Table 7: ASEAN-5’s Trade with Japan (as % of each ASEAN-5 country’stotal trade)9

1985 1990 1995 1997 1998 1999ASEAN-5 21.4 21.4 19.6 17.2 14.7 16.9Indonesia 37.3 34.5 25.8 22.1 18.8 23.3Malaysia 23.8 19.7 20.1 17.4 14.6 15.5Philippines 16.1 19.7 20.6 23.2 17.4 20.5Singapore 13.9 15.1 14.6 12.5 11.3 13.0Thailand 20.8 25.0 23.8 20.6 17.9 20.3

Table 8: Japan’s Trade with ASEAN-5 (as % of Japan’s total trade)10

1985 1990 1995 1997 1998 1999ASEAN-5 6.7 10.9 16.5 14.5 12.5 14.1Indonesia 2.1 2.9 2.9 2.5 2.2 2.5Malaysia 1.4 2.0 3.9 3.4 2.8 3.2Philippines 0.4 0.7 1.2 1.7 1.5 1.9Singapore 1.6 2.9 4.6 4.1 3.7 3.9Thailand 1.1 2.6 4.0 2.8 2.3 2.6

35. Both Japan and Singapore are already actively cooperating andcontributing in their respective ways to promote greater economic andsocio-political stability in the ASEAN region. The JSEPA would add to themomentum and quality of the overall cooperation.

9 Source: IMF and Official sources10 Source: IMF and Official sources


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FORGING SINGAPORE’S TIES WITH NORTHEAST ASIA

36. Likewise, the JSEPA would offer opportunities for Singapore toenhance its access to the Northeast Asian markets and strengthen itsposition as a node in the global economy. It would considerably expandSingapore’s trade and investment flows with the major Northeast Asiancountries. (See Tables 9 and 10.)

Table 9: Singapore’s Trade with Northeast Asia (S$ billion)11

1980 1985 1990 1995 1999China 19.2 5.7 5.2 9.6 16.3Japan 12.5 14.6 30.5 50.4 45.7Korea 1.6 5.3 5.3 12.2 13.1

Table 10: Singapore’s Investment Flows into Northeast Asian markets(S$ million)12

1995 1996 1997China 3,718.1 6,414.1 10,476.9Japan 481.9 454.9 563.1Korea 147.1 258.7 210.7

PROMOTING REGIONAL ECONOMIC INTEGRATION

37. The JSEPA could be a catalyst to stimulate further regionalintegration of markets, particularly in new growth areas. This couldcontribute to the strengthening of the economic resilience and stability ofthe region and its nations.

38. Japan and Singapore are both important constituents of a newvision for Asia. They are well positioned to forge a “New Age” economicpartnership agreement (EPA) as an example to others in Asia similarlygrappling with the paradigm change brought about by technologicaladvances and globalisation.

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11 Source: Trade Development Board12 Source: Department of Statistics, Singapore

SECTION FOUR

THE WAY FORWARD

SECTION FOUR – THE WAY FORWARD

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1. In conclusion, the Joint Study Group noted that Japan andSingapore have developed close strategic and economic ties over manyyears of fruitful cooperation. These are reflected in the strong bilateraltrade and investment linkages, and the common outlooks both countriesshare on many geopolitical issues. The Joint Study Group acknowledgedthat it has been a very rewarding partnership, with each tapping theresources and capabilities of the other for mutual benefit. For example,Japanese companies use Singapore extensively as a base to penetratethe Southeast Asian market and as headquarters to manage production inthe region for global markets. In turn, Singapore benefited much fromJapanese capital, technology and expertise.

2. The Joint Study Group highlighted that the global economy waschanging rapidly with technological progress, especially in the area of ICT,and globalisation. The world was entering a new phase of economicdevelopment, which would be knowledge-based and emphasised thecreation, as opposed to the mere addition, of value. The internationaltrading environment was being reshaped with the growing trend towardsregional economic integration. In addition, the emergence of morecompetitive Asian economies would reshape the economic environment inEast Asia.

3. The assumptions and capabilities which had driven growth in thepast would therefore no longer be sufficient for success in the future.Competitiveness would henceforth depend primarily on the creativity ofthe people, and could be enhanced through greater market integrationbetween countries of comparable levels of economic development, andcollaboration between centres of excellence. Japan and Singapore aretwo such countries. They could build on their past economic and strategicpartnership to carry both countries successfully into the new millennium.

4. In this context, the Joint Study Group firmly believes that the JSEPAwould be mutually advantageous to both countries. The larger marketwould provide greater opportunities and larger economies of scale forJapanese and Singapore businesses. It would also institutionaliseregulatory and other policy reforms in both countries, enabling them tostay attractive to capital and talent. It would enhance Japan’s economicengagement in Southeast Asia, and Singapore’s engagement in NortheastAsia. The complementarity in strengths and capabilities of both countriescould be harnessed to help develop each other’s competitiveness and toexploit more successfully the many emerging opportunities in the regionand the world. The pressure of an EIA would also help both governmentsreform the less competitive elements of their economies.


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5. The JSEPA would have a positive demonstrative impact on othereconomies and would help to catalyse further regional trade liberalisation.As a test-bed for innovative conceptual frameworks and model forpromoting and facilitating trade, the JSEPA would also stronglycomplement the efforts of the multilateral trading system.

6. The Joint Study Group studied many new and innovative ideas onhow both countries could work together to address the challenges andexploit the opportunities of the knowledge-based economy. At the coreare proposals for significant trade and investment liberalisation andfacilitation. These should be complemented and supplemented byforward-looking multi-sectoral initiatives for cooperation in the high-growthareas of the future, such as financial and telecommunication services, e-commerce, media and broadcasting, human capital management anddevelopment of SMEs. Overall, the Joint Study Group concluded thatJapan and Singapore stood much to gain in implementing the proposalsdescribed in Section Two of this report. The broader benefits arising fromthese specific proposals are elaborated in Section Three.

7. The Joint Study Group therefore recommended that both countrieswork expeditiously to put in place a “New Age” EPA that encompasses theproposals described in this report and which would provide a frameworkfor significant economic integration between the two countries. The JointStudy Group is convinced that such an EPA would bring significantbenefits to both countries, in particular, in strengthening the capabilitiesthat they would require for the New Economy. The Joint Study Groupbelieves that the JSEPA could be achieved relatively painlessly becauseof the complementary nature of the two countries, and that the obstaclesto its successful conclusion were minimal and could be overcome.

8. Specifically, the Joint Study Group strongly and respectfullyrecommends that:

a. The Prime Ministers of Japan and Singapore make a jointannouncement, at an appropriate location and timing inOctober or November 2000, that the two countries intend toenter into formal negotiations with a view to concluding aneconomic partnership agreement between them;

b. The negotiations begin at an earliest possible timing,targeting January 2001, and be concluded within areasonably short period of time so as not to lose momentum;and

c. Given that the scope of negotiations will transcend the focusof a traditional FTA, the resulting Government-to-Government


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agreement should henceforth be referred to as the JAPAN-SINGAPORE ECONOMIC AGREEMENT FOR A NEW AGEPARTNERSHIP.

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BACKGROUND - meti.go.jp · PDF fileb. the negotiations ... c. given that the scope of negotiations will transcend the focus of a traditional free trade agreement, the resulting