The EU Centre in Singapore and the Singapore Business Federation (SBF) organized a panel discussion entitled “The European Elections: What it means to the Singapore Businesses” at the SBF’s premises on the 4th August 2014. The distinguished panellists at this event were Mr Richard Werly (Le Temps Newspaper, Switzerland) and Mr Shivaji Das (Head, Public Sector Consulting Practice at Frost & Sullivan). The panel discussion was officially opened by Mr. Ho Meng Kit (CEO, Singapore Business Federation) and Dr. Michael Pulch (EU Ambassador to Singapore), who both provided the background on the latest developments in the growing Singapore-EU partnership.
Mr. Richard Werly started off his presentation by arguing that the answer to what the European elections would mean to Singapore businesses could be found by looking at who will be in chargein Brussels in the coming years. With regards to the economic situation in the EU, Werly highlighted that challenges remained with regards to the level of debts in the Eurozone and the EU is not completely out of the woods yet. The economic crisis has fuelled the rise of anti-globalization sentiments in EU, which has led to the increase in number of anti-EU MEPs in the European Parliament. These anti-globalisation sentiments might in turn translate to greater scrutiny of FTAs. . On more specific issues concerning EU-Singapore relations, Werly highlighted tax cooperation and tax evasion as potentially of concern.
On a more positive note, Werly said that the EU is paying much more attention to Asia, and not just China, but also Southeast Asia and ASEAN, than 6 years ago. The EEAS is also trying to be more present in Southeast Asia, and this is a good point for Singapore as it stands to gain from this visibility policy of the EEAS. The EU also stands to gain from the regional integration efforts towards the ASEAN Economic Community, as more exchange and dialogue will take place with regards to sharing of experiences in community building and integration.
Werly then touched on the new EU leadership in Brussels. For him, the EU needs new faces, and hence he was a little disappointed with the appointment of Jean-Claude Juncker as the next president of the European Commission. The priorities for Juncker now is to the Commission portfolios with old and new faces, and his gut feeling is that France’s Pierre Moscovici would get an important portfolio in Economic and Monetary Affairs. Gender will be an issue in deciding the other two key leadership positions – the President of the European Council and the High Representative of the EU’s Foreign Affairs and Security Policy. Polish Prime Minister, Donald Tusk and the Danish Prime Minister, Helle Thorning-Schmidt are names that have surfaced for the position of President of the European Council, while Polish Foreign Minister Radoslaw Sikorski and Italian Foreign Minister, were possible candidates for the High Representative. Werly personally felt that Bulgaria’s Kristalina Georgieva would be an ideal candidate for the High Representative post given her track record with the Humanitarian Aid portfolio in the 2010-2014 Commission, and remarked that Radosław Sikorski (Poland) may miss out on replacing Catherine Ashton if Polish PM Donald Tusk becomes Council President.
The big winner in these elections is second-term EP President Martin Schulz, who Werly thinks may even decide to jostle for more political power after his EP Presidency term is up. Also, he expects that the EP will muscle its position more in its 2014-2019 term. However, he also pointed out that the EP now faces issues in terms of monitoring the implementation of a number of policies and regulations that they have voted for in the past, and hence may not be into too many new regulations. There is also the possibility of the EP majority being fractured during this new parliamentary term. All in all, he expects the debate in the EP to be rougher this time especially with the increase in Eurosceptic parties.
Shifting his focus to the UK, France and Russia, Werly warned of the implications on Asia should UK leave the EU. An EU without the UK spells trouble for businesses. The UK is afterall a point of entry to the EU for many Asian countries. He also remarked that though there are those within the EU who looked upon UK as a trouble maker, Cameron’s argument for the EU to reform itself before making new laws, makes sense and should not be taken lightly. Likewise, the EU should also be cautious about France: trouble in France spells problems for the EU as France has been traditionally one of the engines of the EU. Lastly, Werly believed that the EU’s deteriorating relations with Russia is down to the matter of trust.
At the end of the day, Werly thinks that there is opportunity in crisis for Singapore businesses looking to invest in Europe. However, he also warned that companies should look out for three “axes”: the American isolation axis can affect Europe in terms of TTIP, EU energy security and even military security in Europe. Similarly, the age and debt axes also spell trouble: there are social difficulties in terms of getting more young people to support Europe’s ageing population, and the EU is in danger of getting into a trap of borrowing more money to sustain fiscal needs.
Next, Mr Shivaji Das spoke about the business outlook in Europe for Singapore businesses. The business outlook in Europe is good, but investors should be cautiously optimistic. He noted that the UK, Germany and Spain recorded strong growth recently. Also, Portugal and the Eastern European economies (in particular Czech Republic) has shown good growth rates, and the ECB is moving towards freeing much needed funds for these economies to develop. Nevertheless, he reminded the audience that the recent Portuguese bank crisis once again shows that the crisis in Europe is far from over.
There are also concerns about Italy, the shrinking Dutch economy as well as a big question mark on the health of the French economy. In agreement with Werly, Shivaji argued that whatever happens in France will set the tone for the rest of the EU. However, he also noted that the north-south economic divide is actually getting less relevant today as countries such as the Netherlands, Belgium and France are also not doing too well. Unemployment also remains a big problem for the Spanish and French economies. In particular, there is high unemployment among the youths in these countries and this has affected sentiments towards mainstream political parties as well as the general economic direction of the EU.
Inflation continues to remain low in EU, leading to fears that it may go into a deflationary state despite the ECB’s attempts to contain deflation. Indeed, there is fear that Europe would slump into the Japanese mode in the 1990s. Given the EU’s similar demographic profile with Japan, there is a danger that the EU economies would remain in stagnation for a decade or more. All this is linked with unemployment: with fewer or no jobs, households would have lower purchasing power in Europe, and there would be less consumer demand in the EU.
Nevertheless, the fact is that more Asian companies are making inroads into Europe – Shivaji pointed out that companies such as Tata and Huawei have made big investments into European corporations. For some, this could be seen as a sign of prestige or status especially for Indian and Chinese companies, but there are still solid opportunities for growth in the services sector. In the context of the EU-Singapore FTA, as the Singapore and the EU economies are already pretty open towards each other, Shivaji felt that the FTA won’t be the deciding factor for Singapore companies investing in the European Union although it may boost trade in terms of manufacturing and public procurement. In general, Singapore companies should instead be concerned about how to develop a competitive edge in EU in terms of finding the right partners and manpower.
Overall, given the size of the EU’s population and relatively high purchasing power, Shivaji thinks that it still worth it for Singapore companies to invest in the EU and that they should not wait for the FTA to kick-in before making preparations. Of course, he noted that the EU is not a single entity and that every economy in the EU is distinct – it important for companies to know the context of the countries that they are investing in as going into the German market is different from the Italian and Czech ones. Indeed, considerations for Singaporean companies investing in the EU should be country specific rather than focusing on the EU as a whole.
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