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16th November 2014

Singapore Economy

Infrastructure and trade boost needed for growth: PM Lee

He highlights need to fight protectionism and the importance of smart infrastructure

Source: Straits Times / News

Leaders of the world's biggest developed and emerging economies were urged yesterday to lower trade barriers and address infrastructure gaps in order to stimulate world growth.

Speaking at a working dinner for leaders at the Group of 20 (G-20) summit, Prime Minister Lee Hsien Loong noted that both trade and infrastructure are key to improving the global economy, but that there have been recent "worrying" trends.

Trade has become more restrictive and its progress has slowed significantly in recent years and has lagged behind the pace of economic growth, PM Lee said.

In the last two years, world trade grew an average of 2.2 per cent, lower than 3.4 per cent global growth, according to data from the World Trade Organisation and the International Monetary Fund.

To address this, more must be done to fight protectionism and facilitate trade, PM Lee said.

While the G-20 countries - which represent some 90 per cent of the world economy and 80 per cent of global trade - have pledged to halt moves that hamper trade, the results have been "disappointing". Protectionism must be reduced to help companies "access opportunities globally", he added.

PM Lee also welcomed last week's breakthrough on the Trade Facilitation Agreement, after India and the United States resolved food security issues, but said that this was only one "modest" aspect of the Doha world trade talks that are still at an impasse after 13 years.

"We must apply the same political resolve as we did to settle the Trade Facilitation and food security issues to the rest of the Doha Development Agenda," he said.

More work also needs to be done on infrastructure, which not only spurs growth but, when enhanced with technology, can also improve the quality of life, PM Lee added.

Such "smart infrastructure" will enable emerging cities to leapfrog more developed ones, he said.

He cited the examples of Santiago in Chile, which is using sensors to monitor highway congestion and vary toll charges in real time, and Singapore, which has invested in technologies to recycle used water into affordable clean water.

But to realise the full potential of smart infrastructure, governments must improve how projects are managed and financed, he said.

PM Lee also highlighted the importance of recent multilateral initiatives, saying new players such as the new Asian Infrastructure Investment Bank - of which Singapore is a founding member - should work with the World Bank and Asian Development Bank to meet "immense" infrastructure needs.

Trade and infrastructure are major themes at this weekend's summit, as host Australia aims to focus the G-20's attention on boosting global growth by another 2 per cent by 2018.

This would deliver "spillover" effects allowing non-G-20 economies to grow a further 0.5 per cent in the period, according to a report by The Australian newspaper yesterday that cited a draft copy of the G-20 Brisbane Action Plan. Singapore is not a G-20 member but is one of six countries invited to this year's event.

Structural reforms are also high on the agenda. On the summit's sidelines, China has said it will take steps to solve its economic problems while the US has urged Japan to use reforms as well as fiscal and monetary easing to fight deflation.

Meanwhile, G-20 leaders have agreed to set up a global infrastructure hub, which may contribute an additional US$600 billion (S$780 billion) to global economic output by 2030.

-By Fiona Chan, Senior Economics Correspondent in Brisbane