Distinguished guests,

Ladies and gentlemen,

Introduction – the Asian economic landscape

I am pleased to be here with you this morning, at the opening session of International Enterprise Forum 2006.

The theme for this year’s event “The Globalisation of Asian Enterprise” could not have been more appropriate. Up until the mid-1990s, the world was largely charmed by what was then known as the East Asian Miracle. During that period, first Japan, and then the four Asian tigers of Hong Kong, Singapore, South Korea and Taiwan, made rapid economic progress.

While Asia may have lost some of its luster after the financial crisis of 1997, we are now seeing renewed focus on Asia. In particular, the emergence of China and India as new economic powers has caught global attention. Last December (2005), revised figures from China’s National Bureau of Statistics raised China’s GDP in 2004 by over 16%. This adjustment meant that China was the sixth largest economy in the world, after overtaking Italy. If GDP figures from Hong Kong were included, China would catapult into fourth place[1], over-taking France and Britain. India, too, has done well. Within a decade from 1994 to 2004, India's GDP has more than doubled, from US$310 billion to US$661 billion.

Asian enterprises making a splash

Beyond the macro-economic numbers, Asian enterprises outside of Japan have also been making headlines in the international corporate arena. They took up 46 positions in the 2005 Fortune Global 500 rankings for the world’s largest companies by revenue, including 16 from China, 11 from India and 9 from Australia.The Forbes International 2000 list released in April 2005, which ranks the world’s public corporations by a composite of sales, profits, assets and market value, also featured 250 Asian companies (excluding Japan).

There are a number of ways for companies to grow. Mergers and acquisitions, for example, is one way to increase size and top-line, as well as to gain instant presence in foreign markets. Perhaps the first high-profile acquisition by a Chinese company that caught global attention was consumer electronics company TCL buying over the television operations of French manufacturer Thomson in 2002. In December 2004, the 20-year old Chinese PC maker Lenovo bought IBM’s PC business, worth US$1.75 billion, making it the third-largest PC manufacturer in the world.

On the other hand, Indian companies have also been going on what BusinessWeek (Oct 18, 2005) called “a quiet shopping spree”. For example, the Tata Group has spent US$1.1 billion over the past 5 years buying Britain’s Tetley (tea), US telecom network operator Tyco Global and British engineering design house INCAT.

Drivers of Enterprise Growth & Implications for Singapore

Clearly, profitable growth is imperative for all profit-oriented companies. The question therefore, is how can companies in Singapore achieve profitable growth beyond their current size? How do they create unique value propositions to differentiate themselves from their competitors? Growth is therefore a complex subject, to which I do not profess to know all the answers. However, it may be worthwhile to take a leaf out of Lester Thurow’s book, where he cites three main gaps that companies can exploit to achieve high growth[2].

First, the technological gap. A company that comes up with a technologically advanced product or a brand new concept often generates considerable revenue before others can catch up.

One of the fastest growing global brands, Samsung Electronics is one such example. If not for Korea’s sophisticated consumers, Samsung would not have built up its strengths in product design and operations so quickly. In fact, it was the 5th largest private sector recipient of US patents in 2005, up from 6th position the year before. Samsung also capitalised on synergies between its semiconductor and consumer businesses, and quickly turned new designs into manufactured products. Today, Samsung is a leading producer of digital TVs, memory chips, mobile phones, and thin-film-transistor liquid crystal display (TFT-LCD) panels.

Singapore companies competing in the consumer electronics segment need to invest in R&D and scientific manpower, to create patents, and bring products and services to the market efficiently. Recently, the National Research Foundation highlighted 3 priority areas of focus for Singapore: biomedical sciences, environmental/water technologies, and interactive/digital media. These three sectors require substantial amount of R&D and product development. A*STAR will continue to assist companies to build R&D related capabilities. If we succeed, we will create an industry with many vibrant companies and new jobs. These technologies will create export opportunities for our companies.

Second, the developmental gap. Companies can also bring products or technology that already exist in a more developed region to a less developed one. Examples would include Chinese manufacturer Hai’er which has brought domestic appliances to the Chinese mass market, and automakers Chery, and Geely which both offer cars for the average Chinese consumer. As the per capita income in a developing country rises, demand for new products and services is generated. Firms must be able to spot these trends in order to capitalize on this new demand.

Similarly, Singapore companies across different industries should take a closer look at the fast-growing developing markets within our 7-hour flying radius. For example, our real estate and construction companies are already benefiting from the housing boom and rising demand in many Chinese cities. Service companies like insurance companies and banks will also find growing regional demand, given rising income levels and increasingly discerning consumers.

Third, the sociological gap. Companies can seek business opportunities by changing social habits or leveraging on changes in social demographics. Starbucks is a classic example of how a price-competitive commodity was transformed into a differentiated gourmet product positioned as a lifestyle choice. Japan’s QB (Quick Beauty) House has gone the other way, shifting the Asian barbershop industry from an emotional industry to a highly functional one. Doing away with many processes that were part of a haircutting ritual, QB House reduced both the time and cost involved in getting a haircut for Japanese men, while raising the hourly revenue per barber by 50%.

To bring about changes in lifestyle choices and consumption behaviours, Singapore companies need to innovate their business models to cater to specific consumer segments. One way is by merging different service offerings to create new value propositions. Singapore’s own Breadtalk is one such example, elevating bread-eating to a bread culture by offering designer bread from its bread boutiques. We have many other nimble Singapore companies such as Eu Yan Sang, Ya Kun, 77th Street and Koka that can adapt their products or services to take advantage of changing social trends in the region.

Singapore – growing our own global companies

By exploiting technological, developmental and sociological gaps in the regional and international markets, we hope to see more high-growth companies emerging in Singapore. Importantly, we would like them to use Singapore as their home base and springboard, to spread their wings into the region and beyond.

Through IE Singapore, the government will continue to facilitate efforts by our companies to internationalise. In addition to an extensive global network of overseas offices that are able to provide both market information and leads to our companies, IE also runs a wide range of programmes that aim to upgrade our local enterprises’ business capabilities and increase their access to financing.

Conclusion

Much depends on our companies. Ultimately, it is your drive and determination that will bring about success, especially in new and challenging markets. It is therefore heartening that today’s keynote speaker Ram Charan will be highlighting the importance of strategy execution. With solid strategies and robust execution, we should hopefully see more Singapore-based companies making it into the global rankings in time to come.

I hope that events such as the International Enterprise Forum will help to raise companies’ awareness of new market trends and opportunities, as well as give rise to networking opportunities among yourselves. By working together, you can leverage one another’s strengths and build a united force to be reckoned with in international markets.

I wish you all a fruitful two days at the Forum. Thank you.

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[1] The three largest economies in the world are the United States, Japan and Germany respectively.

[2] In Lester Thurow’s book “Creating Wealth”, he talks about how change that leads to technological, developmental and sociological disequilibriums create high-return, high growth opportunities.