Jamus Lim urges alignment of Singapore’s laws with future trends, flags illicit activity risks

Associate Professor Jamus Lim, a Workers’ Party Member of Parliament for Seng Kang GRC, recently highlighted the crucial need for Singapore’s laws and economic strategies to adapt to forthcoming global trends.

In a Facebook post on Wednesday (6 Dec), he emphasized the importance of considering emerging economic paradigms rather than focusing solely on minor adjustments that might not be pertinent in the future.

His concerns were articulated during a parliamentary debate on the Free Trade Zones (FTZs) Amendment Bill, where he advocated for continual refinement of laws governing FTZs to prevent potential misuse for illicit activities.

“I explained how, by all means, we should continually refine our laws on FTZs to ensure that they do not become an inadvertent back door for illicit activities (although it wasn’t always quite clear how the proposed Bill would achieve this goal).”

Although he commended Singapore’s success driven by an open trading system encompassing goods, services, capital, people, and ideas, he also pointed out the stagnation in the forces of globalization, historically favourable to Singapore’s economy.

Assoc Prof Lim cautioned against excessive reliance on dated strategies, such as heavy investment in large-scale infrastructure projects or a tax regime built upon a global era that might be fading.

“We should also carefully consider whether the strategy of attracting foreign capital via our tax regime will still be relevant. After all, the accord on a minimum global corporate tax is proceeding apace, leaving less room for attracting finance with low taxes.”

Instead, he proposed a shift in focus towards durable sources of attracting global capital, such as investment in digital infrastructure, nurturing a highly skilled workforce, reinforcing institutional frameworks, and fostering an environment conducive to the free exchange of ideas.

Drawing an analogy from hockey, Lim emphasizes the need for Singapore’s economic model to align with emerging future trends rather than relying solely on past successes.

“While I don’t have a crystal ball, my sense is that the more important ingredients for the future lie not in the stuff we traditionally associate with FTZs (like tax holidays), but in elements like how agglomeration facilitates technology transfer and knowledge creation. ”

He stressed the importance of aligning laws and economic strategies with future prospects rather than engaging in minor adjustments that may lose relevance over time.

“Our laws need to reflect this understanding, rather than putz around with tweaks that won’t matter much in the future. Our economy needs to skate to where the puck will be.”

Concern over FTZ Amendment Bill’s effectiveness in tackling illicit activities

During the debate on 4 October, Assoc Prof Lim scrutinized the efficacy of proposed amendments in addressing concerns about illicit activities, particularly money laundering and terrorist financing.

He emphasized that while legislation cannot cover every monitoring and enforcement procedure, one of the main reasons for the proposed revisions is to tackle these issues.

He draws attention to examples from the real estate sector, where, despite having numerous laws in place, insufficient compliance rendered them ineffective.

“Even in the context of free zones, multiple reports swirling around alleged illicit activities within Le Freeport raises questions of how rigorous the process of due diligence and compliance with regulation truly is. ”

“Some of these activities include tax evasion, storage of looted goods, besides money laundering and terrorist financing, ” he added.

Assoc Prof Lim then queried the Ministry’s stance on devolving responsibilities to licensed FTZ operators, questioning how this would enhance due diligence and regulatory compliance.

In his debate, he underscored the shifting global economic landscape post the global financial crisis, expressing caution about overreliance on continued international integration.

He drew attention to impending international minimum corporate tax agreements that might erode Singapore’s competitiveness in attracting global capital.

Highlighting the primary advantage of FTZs in fostering agglomeration benefits, he emphasized that contemporary knowledge exchange transcends physical FTZ boundaries, advocating for a broader national openness to data, information, knowledge, and ideas within legal boundaries.

Assoc Prof Lim stressed the need for qualitative enhancements alongside quantitative metrics, advocating for fostering open debates, promoting innovative thinking, and cultivating a versatile workforce to align with future economic trends.

Chee Hong Tat defended the significance of FTZs despite economic shifts

In response, Mr Chee Hong Tat, Senior Minister of State for Finance, addressed concerns about the sufficiency of legislative amendments in combating illegitimate trade.

He stressed that while legislative changes play a role, enhancements to the regulatory framework do not always necessitate alterations in legislation.

“Some can be operational in nature, for instance, improving sense-making and detection capabilities and stepping up enforcement efforts, which are what Singapore Customs has been doing over the years. “

Mr Chee highlighted the proactive measures undertaken by Singapore Customs, including the continuous development and refinement of risk profiles and indicators to efficiently identify suspicious goods before they entered into Singapore.

He further elaborated on various strategies implemented by Singapore Customs, which encompass sharing red flags with industry partners, leveraging data analytics and artificial intelligence, and fostering robust collaborations with enforcement agencies and international counterparts.

While Assoc Prof Lim proposed a shift in Singapore’s economic approach to align with the evolving global landscape, Mr Chee dismissed his suggestion.

Mr Chee acknowledged that there is a noticeable shift in global supply chains and trade flows, which he agrees with.

However, he disagreed with Lim’s proposition that these alterations would diminish the significance of trade flows and global trade, leading to a reduced relevance of Free Trade Zones.

“I think that is not quite in line with what we have seen, based on industry feedback, and also if we hear the speeches from the other Members in this House, including those with practical business experience, that is not what they are saying. ”

“They believe that FTZs continue to play an important role in supporting our position as a trade hub.”

He also pointed out that despite the changes in global trade dynamics, the container volumes at PSA (Port of Singapore Authority) have been growing, indicating ongoing trade activity.

“All this is because we know that even though globalisation may affect global supply chains, the world still needs trade. If we position ourselves as a trusted competitive trade hub, we can still capture a slice of the pie. ”

Contrasting views on future growth and global trade relevance

While Assoc Prof Lim highlighted reports of alleged illicit activities within Le Freeport, Mr Chee clarified that despite its name, Le Freeport is not categorized as an FTZ.

“It is a high-security warehouse facility located near Changi Airport that is modelled after similar institutions in Geneva and Luxembourg. ”

“Le Freeport Singapore offers climate-controlled storage solutions for both businesses and individuals, enabling storage of valuable assets, such as art, wine and precious metals, ” Mr Chee explained.

Assoc Prof Lim then further pointed out that Le Freeport is situated within a duty-free zone within the Changi Airport Logistics Hub, which he believes is among the nine free trade zones in Singapore.

However, Mr Chee disagreed with this classification and stated that Le Freeport is not a free trade zone.

Jamus Lim expressed a viewpoint that FTZs might not be an area of substantial growth in the future, emphasizing the importance of focusing on other areas like information flows. He referred to the plateauing of merchandise trade as a share of global GDP over the past 15 years.

In contrast, Mr Chee Hong Tat disagreed with Lim’s perspective.

He highlighted that despite the ongoing reconfiguration of global supply chains, the global necessity for trade remains steadfast. He emphasized the need for Singapore to adapt its strategy to retain a pivotal role in the evolving global supply chains.

Underlining the importance of investing in infrastructure such as T5 and Tuas Port, along with operational systems and a skilled workforce, Mr Chee highlighted Singapore’s role as a trusted and reliable hub during the COVID-19 pandemic, facilitating the continuity of global supply chains.

The FTZ Bill was subsequently passed by the People’s Action Party (PAP) majority Parliament after its third reading.