Keynote Address by Mr Murali Pillai SC, Minister of State for Law and Transport, at the Forum on Asian Insolvency Reform 2024
Honourable Judges,
Distinguished Guests,
Ladies and Gentlemen,
A. Introduction
1. A very good morning to each and every one of you.
2. Before this event started, I had an opportunity to speak to some of you. A special welcome to those of you who have travelled to Singapore, especially some that have come from afar. The weather has not been so kind today, but you have braved the tropical thunderstorm. It is fair to say that your attendance at FAIR shows that there are no fair-weathered friends!
3. It is my honour to deliver the Keynote Address at this year’s Forum on Asian Insolvency Reform, or “FAIR” for short, and I am delighted to welcome you to Singapore for this forum.
4. I gather that this is an august gathering of thought leaders, here to talk about ideas of how to make the insolvency system better. I mentioned to Ms Julia Fraser from the World Bank that her Welcome Remarks set the stage very well on economic trends in Asia, debt levels, and how the insolvency systems can improve.
5. This is the first FAIR to be held in-person since 2018.
6. I am pleased to note that the speakers and attendees hail from over 20 jurisdictions, which promises a vibrant exchange of views.
B. Broad Economic Trends
7. The theme of FAIR this year is “Innovating insolvency in a transforming Asia”.
8. On the latter part of this theme – transforming Asia – it is an undoubted fact that Asia’s economy is growing and transforming rapidly. Sometimes it goes down in the near term, but in the long-term, the trend is up.
9. Whilst global economic growth is expected to continue being weak and subdued in the coming years by historic standards, the Asia-Pacific region is projected to continue growing at a faster pace than the rest of the world.1
(a) The International Monetary Fund forecasts that the global economy will grow by 3.2% in 2024; Asia and the Pacific regions will grow at a greater pace of 4.5%.2
(b) This is further underscored by the fact that these regions are expected to contribute 60% of global economic growth in 2024.3
10. In our immediate vicinity, ASEAN economies continue to grow rapidly.
(a) Based on ASEAN’s total GDP of US$ 3.6 trillion in 2022, ASEAN was the world’s fifth-largest economy.4
(b) Looking ahead, there are estimates that project ASEAN’s GDP to grow to US$ 4.5 trillion by 2030.
(c) This would propel ASEAN to become the world’s fourth-largest economy in just six more years.5
11. While the long-term trajectory is positive, there are challenges and uncertainties in the road ahead.
(a) Ongoing geopolitical tensions such as the conflicts in the Middle East and in Europe; and
(b) Geoeconomic fragmentation, including trade tensions.6
12. Besides these near-term risks, economies will also have to grapple with major transformative shifts that will fundamentally alter the business landscape.
13. I will briefly mention the digital and green transformations.
14. Globally, the digital transformation has accelerated in recent years, driven in part by the Covid-19 pandemic. This has changed, and will continue to shape, the way we live and work, including how we do business.
(a) Businesses are increasingly using new technologies in their operations to drive productivity and growth.
(i) For instance, artificial intelligence tools can assist finance professionals with crunching and analysing large amounts of data to spot credit risks or other issues of concern, which would have otherwise required significant manual effort.7
(b) Businesses, in particular the smaller ones, are now better able to expand their outreach across borders, by using technology and online platforms.
15. The green transformation will likely be one of the deepest and broadest transformations in the coming years.
(a) Climate change has resulted in an increase in extreme weather events, which have far-reaching implications.
(i) In a 2024 Climate and Catastrophe Insight report by AON, flooding remains a recurring threat in the Asia-Pacific - which annual losses having exceeded US$30 billion every year since 2010.8 That is a lot of money lost through floods.
(ii) Many countries saw significant flooding and rainfall events last year, including Hong Kong, South Korea, India, and Pakistan.
(b) Most pertinently for the insolvency community, climate change can adversely impact the financial performance of businesses. According to an Asian Development Bank Institute working paper9, such adverse impact can occur directly and indirectly:
(i) The direct impact includes implications for the core operations of businesses, such as damage to production materials and infrastructure. Further challenges include potential disruptions to the value chain, such as the supply of raw materials.
(ii) The indirect impact is equally significant. These include climate-related financing constraints, such as carbon pricing and other climate-related policies, that could impose additional regulatory costs and financial burdens on companies.
(c) As concerns about climate action become more urgent and the shift towards a sustainable economy gains momentum, we expect to see businesses, impacted by transitional pains, relying on the restructuring and insolvency (“R&I”) regime to transform, restructure or wind up.
C. Impact and Importance of R&I Regimes and the Need to Innovate R&I Regimes
16. As the operating environment is reshaped by such transformations, it behooves us to innovate the R&I regime, which is an important component of the business ecosystem.
17. The economic benefits of a strong and effective R&I regime are widely recognised, especially by today’s audience. In this regard, allow me to highlight two points regarding the impact and importance of R&I regimes and the need to innovate our R&I regimes.
18. First, R&I regimes will assist economies in their growth trajectories. This was a point alluded to by Ms. Fraser just now.
(a) It helps viable businesses that have fallen into difficult times to rehabilitate and get back to their feet - better and stronger. This, in turn, helps to promote entrepreneurship, access to finance and encourage foreign investment.
(i) For example, we have seen Southeast Asian carriers - Garuda Indonesia, Malaysia Airlines and Thai Airways - go through restructuring exercises which enabled them to survive the impact of the COVID-19 pandemic on the aviation industry.
(b) At the same time, for businesses that are no longer viable, the R&I regime facilitates the recycling of capital back into the economy.
19. Second, there is an increasing need to innovate the international aspects of R&I regimes.
20. The simple reason is that law follows business and law follows trade.
21. It is clear that there is major cross-border commercial activity in Asia:
(a) In 2022, foreign direct investment in Southeast Asia reached a record high of US$224 billion.10
(b) Asia-Pacific's 50 largest consumer product companies saw overseas revenue grow three times faster than domestic revenue between 2012 and 2021 - engaging in cross-border M&A to accelerate growth11
22. When such enterprises face financial distress, different laws and stakeholders will be engaged across different countries. This will be a topic of much interest over these two days. To preserve value and ensure cost-effectiveness of the proceedings, it is important for R&I regimes of the different countries to be able to operate seamlessly with each other.
23. For instance, in the recent wave of cryptocurrency-related insolvencies, such as FTX, Babel Finance and Zipmex, there have been insolvency proceedings opened across multiple jurisdictions with different insolvency frameworks.
(a) On this note, I understand that there is a panel tomorrow that will take you on an in-depth discussion on this topic.12 I am sure that you will benefit from the attendance.
D. How to Innovate in Insolvency?
24. Turning to the first part of today’s theme - innovating insolvency - such innovations can take many forms.
25. I would like to offer my perspectives on two key categories of innovations that may have substantial impact.
26. First, ‘hard’ frameworks, through the implementation of legislation.
(a) We are observing an increasing pace of insolvency reform.
(b) For instance, recent reforms include:
(i) Myanmar in 2020 - which introduced more cost-effective insolvency procedures for the rehabilitation and liquidation of MSEs.13 Similarly, there are reforms for small business insolvency procedures as well. Such reforms have also been adopted in Singapore and Australia.14
(ii) Malaysia earlier this year - which introduced new corporate rescue features to assist financially distressed businesses.
(c) On the international aspects, there remains room for greater harmonisation and inter-operability between jurisdictions. I hope this forum can contribute to that.
(i) In this regard, jurisdictions may consider adopting model insolvency legislation or guiding instruments, adopted by international harmonisation bodies, such as UNCITRAL, which I understand will be covered in detail on a panel tomorrow.
27. On building up institutions, besides having the laws on the statute books, it is important to have well-functioning institutions, including Government officials, policymakers and judicial officers as well as practitioners that can effectively apply such laws.
(a) For example, from the Singapore perspective, we have clarified the jurisdiction of the Singapore International Commercial Court (“SICC”) to hear cross-border R&I matters.15 This Court allows International Judges and foreign counsel from different jurisdictions and different legal systems to play a role in such cases.
(b) It is hoped that institutions such as the SICC will serve as trusted, neutral forums within Asia with the relevant expertise where distressed multi-national businesses can seek a restructuring. As an example, the SICC recently approved a pre-pack scheme that was proposed by Vietnamese property developer No Va Land.
E. Importance of Cooperation and Coordination Between Jurisdictions Moving Forward
28. In concluding, I am very glad to be here with you today, particularly as many of tomorrow’s insolvency problems will have to be resolved through cross-border communication and cooperation.
29. As mentioned earlier, there remains room for greater harmonisation and inter-operability between jurisdictions. This can only be achieved by fostering cooperation, communication and coordination at all levels and across various platforms.
30. In this regard, FAIR is an excellent opportunity for people-to-people exchanges. This complements other initiatives, such as:
(a) The Judicial Insolvency Network ("JIN") which facilitates communication and cooperation within a network of insolvency judges across the world. The JIN held its 5th JIN Conference in Singapore in June this year, with a record attendance of 32 participants.16
(b) The Regional Restructuring and Insolvency Institutes Forum (“RRIOF”). The RRIOF gathers various representatives of national insolvency associations in the Asia-Pacific. Its inaugural meeting was held last year, in conjunction with the Singapore Insolvency Conference, and included representatives from China, Japan, India, and Indonesia. The RRIOF is scheduled to meet again at the upcoming Singapore Insolvency Conference 2024, to be held in October this year
(c) Conferences and seminars – for example, those regularly organised by INSOL – that provide frequent opportunities for the R&I community to gather. We are grateful for that
31. Collectively, these platforms provide valuable opportunities to:
(a) Share knowledge and experiences amongst jurisdictions that are keen to move R&I reforms.
(b) Foster strong collaborative networks in the R&I space, built on common understandings and relationships; and
(c) Promote and establish R&I best-practices and frameworks.
32. On that note, I wish everyone a very fruitful two days at the FAIR. As Ms. Fraser earlier said, I hope the weather clears so that you can enjoy the beauty of Singapore. Thank you.
1. Projections by the World Bank.↩
2. Refer to the IMF’s World Economic Outlook Update (July 2024) (https://www.imf.org/en/Publications/WEO/Issues/2024/07/16/world-economic-outlook-update-july-2024) and the IMF's April 2024 publication on "Regional Economic Outlook: Asia and Pacific" (https://www.imf.org/en/Publications/REO/APAC/Issues/2024/04/30/regional-economic-outlook-for-asia-and-pacific-April-2024). ↩
3. See the IMF’s Regional Economic Outlook Asia and Pacific (https://www.imf.org/-/media/Files/Publications/REO/APD/2024/English/text.ashx). See also IMF Transcript of Asia Pacific Department April 2024 Press Briefing (https://www.imf.org/en/News/Articles/2024/04/18/tr041824-apd-press-briefing) and the article by Nikkei Asia “Asia to drive 60 % of global GDP growth in 2024, led by India: IMF” (https://asia.nikkei.com/Economy/Asia-to-drive-60-of-global-GDP-growth-in-2024-led-by-India-IMF). ↩
4. ASEAN Statistical Brief (Vol IV, January 2024) (https://astnet.asean.org/wp-content/uploads/2024/01/00.-ASEAN-Statistical-Brief-on-GDP_19Jan2024.pdf).↩
5. See above (i.e. ASEAN Statistical Brief (Vol IV, January 2024)).↩
6. Points adapted from the Executive Summary of the IMF's Regional Economic Outlook for Asia and Pacific (April 2024) at page vii.↩
7. Points adapted from article “AI set to boost productivity and jobs in accountancy” by the Institute of Chartered Accountants in England and Wales dated 15 Jul 2024. (https://www.icaew.com/insights/viewpoints-on-the-news/2024/jul-2024/ai-set-to-boost-productivity-and-jobs-in-accountancy).↩
8. See AON 2024 Climate and Catastrophe Report at page 39 (https://www.aon.com/apac/in-the-press/asia-newsroom/2024/natural-catastrophes-caused-usd-65-billion-economic-loss-in-asia-pacific-in-2023).↩
9. See Liu, L., J. Beirne, D. Azhgaliyeva, and D. Rahut. 2024. Climate Change and Corporate Financial Performance. ADBI Working Paper 1457. Tokyo: Asian Development Bank Institute at page 1. Available at: https://doi.org/10.56506/DVFD7780.↩
10. See article by EDB Singapore “What makes Southeast Asia an investment hotspot?” (https://www.edb.gov.sg/en/business-insights/insights/what-makes-southeast-asia-an-investment-hotspot.html).↩
11. Bain and Company's report: Overseas Ambition: Asia-Pacific Consumer Product Companies Use M&A to Accelerate Growth.↩
12. This refers to the panel speaking on “Investor protection in cryptocurrency insolvencies” on 27 Sep 2024, which will discuss (1) the latest developments in cryptocurrency insolvencies, with a focus on high-profile cases in Asia, and (2) the nature of digital assets and the available techniques for increasing investor protection. The panel is chaired by Mr Cosimo Borrelli (Kroll, Hong Kong) and includes OAPT Mr Francis Ng SC.↩
13. https://www.tilleke.com/insights/myanmars-2020-insolvency-law/.↩
14. Asia-Pacific Jurisdictions that have introduced simplified insolvency regimes for small businesses include Singapore in 2021 (Insolvency Restructuring and Dissolution Amendment (Act) 2020), Australia in 2021 (Corporations Act 2001 (Cth) (Australia), Part 5.3B) and India in 2021 (Insolvency and Bankruptcy Code, 2016 (No. 31 of 2016) (India), Chapter III-A).↩
15. In 2022, Singapore clarified that that the SICC has the jurisdiction to hear cross-border R&I matters. This has opened the doors for complex R&I matters to be heard in the SICC before renowned International Judges, including two of the world’s leading insolvency judges.↩
16. https://www.judiciary.gov.sg/news-and-resources/news/news-details/media-release--judicial-insolvency-network-held-its-5th-conference-in-singapore-on-12-and-13-june-2024.↩
Last updated on 26 Sep 2024