hong kong and taiwan ) grew by an average of 14 % p. a., and now exceed our exports to the us. these exports range from integrated circuits, disk drives, scientific measuring instruments, oil and chemical products to food and beverages. in services too, china ’ s rising affluence offers great opportunities to southeast asia. china is one of the fastest - growing sources of tourists to thailand, malaysia and singapore. a growing chinese middle - class will want high - quality healthcare and education services. and wealthy chinese – whose numbers are already not insignificant – will need more sophisticated financial services. in manufacturing, china is rapidly expanding into activities previously carried out in southeast asia. but that does not mean that southeast asia will revert to agriculture and primary production. attractive as china is to investors, it will not soak up all manufacturing investments, nor will it out - compete all other countries in every industry and every product. more likely, southeast asia and china will complement each other in an international division of labour, for example, with southeast asia providing the components and intermediate processing, and factories in china doing the final assembly for the chinese market. the desire of mncs to diversify their investments beyond one or two countries will also promote such an outcome. for our part, singapore is actively positioning itself to benefit from china ’ s growth. when chinese vice president hu jintao visited singapore recently, he proposed four areas for increased bilateral cooperation : high - tech industrial sectors, the economic development of china's western provinces, helping chinese enterprises to exploit international opportunities, and the training of personnel and exchange of talent. officials from both countries are pursuing these ideas. to help chinese companies go international, singapore has mooted the idea of setting up a base in singapore to help chinese companies market their products to the region and beyond. we are actively facilitating singapore business ventures interested in china, providing market information, office space and consultancy services, and maintaining business networks. we have also launched an asian business fellowship programme, to develop a talent pool with operational experience, and network and market knowledge in china. politics & security second, southeast asian governments must tackle the security problems resolutely and decisively. terrorism is not unique to southeast asia. it is a global problem, originating in the middle east, and spreading to every continent. southeast asia cannot be immunised against the terrorism virus. the large muslim populations in the region are a natural host which extremist islamic groups will exploit for concealment and

will act because they know that the objectives of the terrorists are totally beyond the pale. these are not innocent political dissidents exercising their democratic rights. they are ruthless fanatics, quite willing to destroy innocent lives in order to create civil strife and animosity between communities and countries, shake confidence in southeast asian economies and their legitimate governments, and weaken the basis of the states. they cannot succeed, but they can cause great harm in trying. provided the governments respond vigorously to the extremist threat, they can contain the problem and gradually restore confidence to the region. access to markets third, southeast asian economies need to boost external demand by strengthening their access to the major developed markets. in the short term, there is little we can do about the cyclical downturn. but for the longer term, favourable and assured access to key trading partners will allow southeast asian countries to maximise benefits from free trade and globalisation, and make themselves more attractive to investors. one basic approach is to promote multilateral trade, and contribute to a successful outcome of the doha development agenda of the world trade organisation ( wto ). but we need to complement the multilateral approach with bilateral free trade agreements ( ftas ) with our key trading partners. this is why singapore is actively pursuing an fta strategy. we have concluded ftas with new zealand, japan, and the european free trade area ( efta ), and hope to conclude agreements with the us and australia very soon. singapore ’ s aim is not just to boost our own trade links with our fta partners, but also to catalyse broader economic engagement between asean and its trading partners. this is indeed happening. after new zealand concluded its fta with singapore, australia and new zealand proposed starting a closer economic partnership agreement with asean. last year, asean and china agreed to set up an asean - china fta within 10 years. weeks later, prime minister koizumi of japan proposed a japan - asean comprehensive economic partnership, to be modelled on the japan - singapore bilateral agreement. similarly, we hope that the us - singapore fta will become a model for a usasean fta in the longer term. these link - ups show that asean is not turning inwards and away from the global economy, and will give asean a valuable edge as an investment destination. singapore ’ s economic restructuring : philosophy & initiatives given this bracing environment, singapore is at a turning point in our economic development. the whole landscape has changed. we