SPEECH BY MR S ISWARAN, MINISTER, PRIME MINISTER’S OFFICE, AND SECOND MINISTER FOR HOME AFFAIRS AND TRADE & INDUSTRY AT THE INSTITUTE OF POLICY STUDIES-AVENIR SUISSE SEMINAR, 4 OCTOBER 2013, 0900HRS, ORCHARD HOTEL
Professor Tommy Koh, Special Adviser to the Institute of Policy Studies
Your Excellency, Thomas Kupfer, Ambassador of Switzerland to Singapore
Dr Gerhad Schwarz, Director of Avenir-Suisse
Distinguished Guests
Ladies and Gentlemen
Good morning. First of all, I would like to thank IPS and Avenir Suisse for inviting me to this seminar, “Singapore and Switzerland: Learning from Each Other”, which is jointly organised by the Institute of Policy Studies (IPS) and Avenir-Suisse (AS).
2 Switzerland has always been viewed with a special regard in Singapore. That perspective stems from a keen appreciation of our similarities – we rank amongst the most competitive economies in the world, with a relatively small domestic workforce and market, and a strong external orientation – and the sense that Switzerland represents what might lie on the frontier of possibilities for Singapore.
3 Yet, there are also significant differences. Switzerland is a developed economy in the heart of Europe - a mature continent with strong institutions and an integrated regional economy. That represents a set of opportunities which are quite distinctive. Singapore is a young city-state in the heart of Asia, a fast-growing developing region, with some of the largest emerging economies such as China, India and Indonesia, which are seeking to strengthen regional economic integration through initiatives such the ASEAN Economic Community (AEC) 2015 and APEC.
4 Today, I would like to highlight three areas by using an economic lens where I think Switzerland’s experience is of particular significance to Singapore, especially at this juncture of Singapore’s evolution where we embark on a journey of transformation to the next phase of our economic development. It is a journey marked by more modest GDP growth rates compared to our historical experience, a greater emphasis on productivity and innovation as a basis to achieve quality growth and good jobs for Singaporeans, and the thrust to build a sustainable and inclusive economy.
A Strong National Brand Grounded on Deep Capabilities
5 Several aspects of Switzerland’s economic structure would resonate with Singaporeans – a relatively large services sector focusing on financial services, commodity trading, tourism and logistics, coupled with a somewhat smaller manufacturing sector with a focus on pharmaceuticals, chemicals, precision engineering and electronics. The common denominator, and key learning point for Singapore, is the strength of the Swiss brand and what it stands for. Today, when we say that something is “Swiss Made”, it is synonymous with quality, trust, innovation and strong capabilities in a wide range of products and services – from chocolates and watches, to pharmaceutical products and financial services.
6 The Swiss brand is founded on deep, specialised capabilities and a commitment to quality and innovation that Swiss companies have painstakingly built up over decades and centuries. This has been a long and consistent effort. These investments in capabilities and the reputation for quality have allowed Swiss companies to stand apart from their competitors. The consistent effort over time has allowed “Swiss Made” to command respect and a premium from customers worldwide, enabling Swiss companies, from MNCs to SMEs, to capture regional and global market share.
7 The Swiss watch industry, which enjoys a global leadership position, epitomises this point. The industry employs about 53,000 workers, and exported watches with a value of more than 19 billion Swiss Francs in 2011. The strength of the industry lies in the niche watch-making craft that home-grown companies have built up and fine-tuned over centuries.
8 This strategy of developing deep capabilities in some core sectors is not immune to risks. In fact, the Swiss watch industry had to face the challenge of significantly cheaper quartz and digital watches from the United States and Japan in the 1970s and 1980s. It is precisely because there were deep capabilities that the industry was able to consolidate around these niche capabilities, and position its products at the higher value end of the spectrum with superior aesthetics and performance. Ultimately, this allowed the Swiss watch industry to capitalise on the upturn when the demand for luxury watches grew in the mid-1990s.
9 The private sector in Switzerland has played a big role, not just in investing in its own capabilities but in some notable instances, also created spill-over benefits for the wider industry. For example, when the Swiss watch industry was re-emerging in the mid-1990s, the Sandoz Family Foundation, whose family business is in pharmaceuticals, invested in boutique watch-maker Michel Parmigiani and helped create the Parmigiani Fleurier brand. The Sandoz Family Foundation also created an industrial and crafts hub, known as Les Manufactures Horlogères de la Fondation (MHF). Today, the industrial hub hires 450 craftsmen to bring together different types of watch-making crafts such as the making movement components and watch cases, from different regional watch-making cultures.
10 Why do I highlight this? Because what we need to do is to engender, in Singapore context, a commitment to nurturing deep capabilities in a variety of sectors that play to our competitive strengths for the long haul. In our relatively short history, we have been able to develop some pockets of expertise that differentiate us. This includes areas in aviation services, in the offshore and marine sector, in water technology, and also in some of our emerging brands in the food and restaurant businesses. As we venture into other areas, this steady and consistent commitment to invest and foster innovation – at the national, sectoral and enterprise level – in deep and specialised capabilities, is going to be a key factor in Singapore’s capability to differentiate ourselves and reinforce the standing of the Singapore brand.
11 This leads me to my second point. Singapore can learn from Switzerland’s experiences in building a vibrant and competitive R&D ecosystem.
Competitive R&D Ecosystem
12 In the 2013 edition INSEAD’s Global Innovation Index, Switzerland topped the Index, seven places ahead of Singapore. Extensive and organic interactions between the federal and cantonal applied and research universities, the Swiss government and the private sector is a feature of Switzerland’s R&D ecosystem. The Federal Institutes of Technology in Zurich (ETHZ) and Lausanne (EPFL) are world-renowned centres at the peak of research excellence. Both institutions fare well in international university rankings,[1] and this has created a virtuous cycle in their ability to further attract international talent and students to these institutions.
13 Apart from that, strong inter-cantonal competition for industry investments has also strengthened the ecosystem for applied R&D in various industries. It has helped to bridge the gap between the research institutions and the private sector through knowledge transfer platforms. In one example, Fribourg set up a blueFACTORY, five-hectare technology park near its cantonal universities, to attract innovative businesses and start-ups and stimulate technology transfers. In another example, Vaud set up Bioalps, a life sciences cluster comprising world-class research institutions, MNCs and start-ups, to create a synergistic and conducive environment for biomedical investments. Across Switzerland, the cantonal Universities of Applied Sciences (UAS) play the role of intermediaries, and work with SMEs to train industry-relevant talent.
14 Finally, the private sector, especially its home-grown MNCs plays a key role in the Swiss R&D ecosystem. Private sector R&D spending accounts for almost three quarters of Switzerland’s gross domestic R&D spending, or about 2.2 per cent of its GDP[2]. Close to 80 per cent of this private sector R&D spending comes from MNCs. Switzerland’s home-grown MNCs such as Roche, Novartis and Nestlé have nurtured a strong corporate R&D culture to stay competitive through continual innovation. These MNCs also leverage the federal and cantonal ecosystem to drive their R&D efforts. For example, Nestlé has a long-standing collaboration and partnership with EPFL, and its Institute of Health Sciences, a specialised biomedical research institute, is located in the EPFL campus to benefit from these synergies.
15 Taking a leaf from the Swiss model, in Singapore we take a multi-prong approach to nurture centres of research excellence, build and sustain private investment in R&D, and catalyse public-private research collaboration that can yield tangible economic outcomes as part of a dynamic and vibrant R&D ecosystem.
16 The Singapore Economic Development Board (EDB) works with various multinational corporations to support their R&D projects with commercialisation potential. For example, Mead Johnson Nutrition invested US$325 million in a state-of-the-art manufacturing plant in Singapore.
17 But equally important is for strong Singapore-based companies to also invest in capability development. This should not be just an episodic effort but rather a sustained, long-term effort which is part of their company culture.
19 Singapore also has an intermediation that is done through the Agency for Science, Technology and Research (A*STAR) which drives public-private partnerships in R&D. There is also SPRING Singapore which focuses on developing our Small and Medium Enterprises (SMEs). We are convinced that for our SMEs to grow, technology and innovation are the key elements.
Skilled and Talented Workforce
20 Finally, the Swiss experience in developing a skilled and talented workforce is noteworthy and something that we continue to work on in Singapore. Switzerland has a well-established dual-track education system. After eight to nine years of compulsory education, about 20 per cent of each cohort pursues general education in preparation for university, while 70 per cent goes through a vocational track, spending about three out of five days a week at structured apprenticeship programmes with approved companies. This dual-track education system also extends to the university level as well, with research-focused Federal Institutes of Technology on one end, and Universities of Applied Sciences (UAS) on the other. There is porosity between the two tracks, and students can opt to transfer from the vocational track to the academic track and vice versa. I believe this has allowed Switzerland to build a capable local workforce that has the broad-based skill set that we need in a modern and knowledge-based economy that competes globally.
21 In Singapore, there is a renewed emphasis on a well-rounded education that goes beyond academic excellence - about creating multiple pathways, and about pathways that intercept so that there are options for students and individuals to realise their individual aspirations. We can complement this by strengthening the existing internship and work attachments which companies in Singapore offer in partnership with our universities, polytechnics, and Institutes of Technical Education (ITE), and create productive work experiences for students.
22 The other noteworthy element of the Switzerland’s education system is the continuing education and training (CET) landscape which is diverse and comprehensive. It also complements its pre-employment education system. It means the Swiss workforce can continually improve and update the skills and knowledge so that they remain competitive and relevant in the face of changing technologies, increasing internationalisation and demographic shifts. The majority of people living in Switzerland take part in some form of CET. Swiss universities run several programmes in different professional fields. This caters to people with different inclinations and interests. It ranges from the Certificate of Advanced Studies that lasts a few months to the Executive Masters of Advanced Studies that offers comprehensive training in a specific field. This is supplemented by private sector providers who offer courses, seminars and even general learning opportunities such as field trips or workshops.
23 I also want to make one additional observation about the Swiss workforce in the way it has developed, which I think is pertinent for what we discuss today in Singapore and what it means for the future. This is the recognition that the local workforce alone cannot support the economic aspirations and objectives. There is a need to judiciously supplement the local workforce, and in the case of Switzerland, it is done with foreign workers from the European Union and beyond, and at different education and skill levels. Nearly 30 per cent of the 4.8 million-strong Swiss workforce is made up of foreign workers (i.e. not Swiss nationals). Some of them are workers in the construction and hotel industries, while others are professionals and specialists like technicians, engineers and scientists engaged in manufacturing and R&D activities.
24 Switzerland offers important lessons for Singapore in our quest to remain an open economy that judiciously complements a Singaporean core with a foreign workforce - whether it is in sectors not sought by Singaporeans or in new sectors that we seek to develop in order to create opportunities for the future, or to supplement the Singaporean talent pool in some sectors where companies can continue to locate their global and regional headquarters here and maintain their competitiveness.
Conclusion
25 I have shared three areas where I believe that Singapore can learn from Switzerland’s experience – building a strong brand that is premised on quality, innovation and deep capabilities; nurturing a vibrant and competitive R&D ecosystem that yields tangible economic benefits, as well as developing a skilled and talented core in the domestic workforce complemented by foreign component. These lessons can inform our policies and strategies for the next phase of Singapore’s growth.
26 You may ask, what then can Switzerland learn from Singapore? Let me just make one point Singapore has positioned itself as the Global-Asia hub for global companies to access Asia and for Asian companies to use Singapore as a springboard to the world. This is the direct result of the kind of opportunities we see arising from the growth of Asia. We have built capabilities to support this effort. One that I would like to highlight is the fact that we recognise that Asian consumers have different preferences to their Western and even other regional counterparts. Therefore, we have established the Institute on Asian Consumer Insights (ACI) to yield nuanced insights into Asian consumer preferences and to help companies shape their product development and marketing strategies for Asia. Some Swiss companies such as Novartis, ABB and Givaudan have already located business functions in Singapore in recognition of this value proposition. This is an area that Swiss and Singapore companies can collaborate further in terms of mutual interests.
27 While I have shared some of my thoughts on the topic, I believe that there is much more that we can learn from one another. I look forward to hearing your thoughts in the discussion. Thank you.