SPEECH
BY MR S ISWARAN, MINISTER (PRIME MINISTER’S OFFICE), SECOND MINISTER FOR HOME
AFFAIRS AND TRADE AND INDUSTRY,
AT THE SINGAPORE ECONOMIC REVIEW CONFERENCE DINNER
2015,
5 AUGUST 2015, 7.45PM
Professor Euston
Quah, Editor of the Singapore Economic Review and President of the Economic
Society of Singapore,
Distinguished Guests,
Ladies and gentlemen,
Good evening
Introduction
1.
Thank you for inviting me to the Singapore
Economic Review Conference Dinner. I am pleased
to join all of you on the 60th Anniversary of the Singapore Economic
Review, a leading journal that has contributed much to the analysis of economic issues in Asia.
2.
This anniversary celebration occurs on the
eve of another significant milestone. In
a few days, on 9 August 2015, we will be celebrating the 50th year
of Singapore’s independence as a nation-state. We have been variously described as the
“improbable nation”, an “economic miracle”, and the “Switzerland of Southeast
Asia”. Since 1965, our economy has grown
close to 40 times, while our GDP per capita has risen by 13 times, from S$5,300
in 1965, to S$69,600 in 2014.
3.
Singapore’s economic story is often told as a
journey through various stages of development: labour-intensive industries
making way for high-technology industries, growing the services sector, R&D
and innovation. In retrospect, Singapore’s
economic story may seem like a textbook progression from a factor-driven, then an
efficiency-driven, and later an innovation-driven economy. This narrative is familiar, but it is also
incomplete.
Challenges
We Face
4.
In reality, our progress and economic
development was neither linear nor assured. Singapore’s economic journey is punctuated by critical
challenges in each decade, and the collective response of the government and
the people. Scarcity and domestic
constraints shaped, even impelled our economic strategies. Exogenous shocks confronted us with hard
choices and, in some cases, presented new opportunities. And these internal and external challenges
remain - today and well into the future.
5.
Singapore’s ability to adapt to evolving
scenarios, and go against the grain in search of flexible responses to new challenges,
has been the lynchpin of our economic policy. Some of the challenges we face are enduring,
because they are part of our DNA. For
example, our limited land and population are self-evident. Shanghai’s resident population is five times
that of Singapore’s, and Shanghai is but one of more than 600 cities in China. We are indeed a “little red dot” in every
sense of that moniker.
6.
Yet we have managed to carve out a niche for
ourselves. Today, Singapore continues to rank highly as one of the top countries
for doing business and for global competitiveness. We have been ranked number
one on the World Bank’s Ease of Doing Business Report for the past nine years,
and number two on the World Economic Forum’s Global Competitiveness Report for
the past three years.
7.
At the same time, we face other challenges that
are external in source, and sporadic and unpredictable by nature. It is only by remaining nimble and adaptable,
and overcoming economic and other orthodoxies, that Singapore can continue to surmount
such challenges and thrive. In the rest
of my speech, I will outline how we have done so in the preceding decades; three
challenges that confront us today: the resurgence of Asia, the pervasive impact
of disruptive technologies, and the need for a sustainable and adept workforce. And, how we can overcome these
challenges, through enhanced market integration, greater focus on research and
innovation, and deeper skills in our workforce.
Overcoming
and Adapting to Challenges
8.
Dr. Albert Winsemius, Singapore’s economic
advisor in our formative early years, described Singapore in the 1960s as “a
poor little market in a dark corner of Asia.” Given Singapore’s small domestic market and
lack of natural resources, the main task was to industrialise and create jobs
for a rapidly growing population. Hence,
the Economic Development Board encouraged export-oriented industries, and
attracted multi-national companies, or MNCs, to set up base here. This was not conventional wisdom for it went
against the grain of prevailing anti-American and anti-MNC sentiment at the
time. But, it was a strategy that created
good jobs for Singaporeans and boosted economic growth.
9.
In 1973, the Middle East oil crisis resulted
in a quadrupling of oil prices worldwide and precipitated a global recession. Singapore’s
real GDP growth plunged to a third of its pre-crisis rate, from 13.5 per cent
in 1972 to a low of 4.6 per cent in 1975[1]. Singapore also began to experience
greater regional competition for investments by MNCs, and a tightening labour
market. Our economic policy had to adapt
to the new realities. Hence, we shifted
gears towards greater automation and higher value-added investments and
activities. Productivity promotion also
began in earnest, in tandem with a greater push towards mechanisation.
10.
Our next major challenge came in 1985 when Singapore
experienced her first post-independence recession. The downturn came swift and sudden, due to a
confluence of external and internal factors such as decreasing demand for goods
and services from regional countries, and increased operating costs due to
higher wages and rentals. In response,
Singapore sought to diversify our economic base. Manufacturing and services became our twin
growth engines. We identified and
focused on key industrial clusters, such as chemicals, electronics and
engineering. We also channelled
resources to enhance services capabilities in fields such as finance,
transportation, communications and international services. Regional economic integration gathered pace
with mooting of initiatives like the Growth Triangle.
11.
Later, the Asian Financial Crisis in 1997
caused another recession. After the 9/11
terrorist attacks in 2001, the major economies experienced synchronised
slowdowns, and the rise of China and India intensified competition. Singapore adapted by increasing R&D
efforts and encouraging entrepreneurship.
We sought to diversification into newer markets like South Asia, Latin
America and the Middle East. Growth was
increasingly dependent on productivity and innovation. We also took steps to identify and develop new
growth clusters in advanced manufacturing, applied health sciences, urban
solutions, logistics and aerospace, and financial services.
12.
This brief sketch of economic history highlights
two important points. The first is the
dynamic and unpredictable environment which envelopes us; you could say it is
the karma of a small open economy. The
second is that our progress was by no means assured or inevitable at each
critical juncture. It was the result of
a conscious and concerted effort to adapt and, where necessary, go against the
grain. These lessons are instructive as
we contemplate the path that lies ahead.
Growing
Resurgence of Asia
13.
As Singapore approaches the third decade of
the third millennium, I believe the challenges we face are threefold. The first is external - the resurgence of
Asia. This is not a new phenomenon, but it
has intensified in recent years. The
Chinese economy remains formidable, despite concerns about its slowing growth. China continues to manufacture a staggering
proportion of the world’s goods – things we often take for granted: 90 per cent
of all personal computers, 80 per cent of all air conditioners, 70 per cent of
all mobile phones, and 60 per cent of all shoes.[2]
However, China is ascending the value
chain, and will increasingly compete with Singapore in high-tech manufacturing
sectors, such as the semi-conductor industry. India, too, has announced “Make in India” and
“Smart Cities” as two of its priorities, potentially creating a new
manufacturing base in Asia. This could
be a game changer as India’s demographic base is projected to overtake China’s
in less than 15 years. Meanwhile, we are
surrounded by regional emerging economies with untapped potential.
Impact
& Implications
14.
So, what does this mean for Singapore? We can anticipate intensifying competition for
investments, markets, resources and talent in the region. On the brighter side, the rising affluence of
Asia’s growing middle class and the increasing sophistication of Asian
consumers also hold tremendous opportunities for us. Our strong air and sea transport
infrastructure has helped make us a logistics and financial hub for ASEAN, Asia
and the world. We must continue to build
on our strength in connectivity – to be the bridge between Asia and the rest of
the world. Changi Airport, for example,
will be adding a third runway and two passenger terminals in the next 10 years.
15.
We must also continue to support regional integration
efforts such as the AEC, RCEP, and the ongoing Trans-Pacific Partnership (TPP) negotiations.
The TPP aspired to set new benchmarks
for economic integration. It will not
only lower trade barriers and enable better market access, but also establish
common standards, for example in intellectual property and labour law, which will
increase investor confidence. It will
build on Singapore’s robust network of trade links, which is currently one of
the most extensive in Asia.
Proliferation
of disruptive technologies
16.
The second challenge that we face, which is
both internal and external, is the advent and pervasive impact of disruptive
technologies. For example, additive
manufacturing, or 3-D printing, is an innovation that will disrupt traditional
supply chains and create new value networks. It is already transforming industries. Using 3-D
printing technology, General Electric and Boeing have manufactured jet parts;
Nike, football cleats; and Hasbro, children’s toys. Uber has challenged traditional business
models in transportation models, as has Airbnb in hospitality. Electronic commerce means that the world is
our market, but also our competition.
17.
New technologies are reshaping all aspects of
industry, from design and manufacturing, to logistics and distribution, and
service fulfilment. Singapore’s
challenge is stay ahead of the curve, creating value of our own in order to be
a key node in this global network and stay relevant as an economy. These new technologies and business models
will redefine the nature of jobs and the skill sets valued by the market. Our challenge is not only whether we can adopt new technologies more quickly than
others, but also if we create value
by pushing the frontier in new ways.
18.
For this reason, Singapore will continue to invest
in, and refine, our national research and innovation strategies. Our annual R&D expenditure has increased
tenfold in two decades: from $0.76 billion in 1991 to $7.57 billion in 2013. Over the years, our efforts have yielded tangible
results. For example, we have developed new
high-tech industries in sectors such as biomedical sciences and environmental
and water technologies.
19.
The upcoming Research, Innovation and Enterprise
2020 plan will focus our investments in areas where we have a competitive
advantage. We will continue to encourage
small and medium enterprises to embrace innovation and develop in-house
capabilities, and enhance the vibrancy of the start-up ecosystem, so that
entrepreneurship can thrive.
A
sustainable and adept workforce
20.
Out third challenge is internal – our aging
population. Today, there are some 440,000
people aged 65 and above. This is double
the number 15 years ago. In 15 years’
time, it will double again to 900,000. And
if our total fertility rate stays between 1.1 to 1.3, as it has for the past 12
years, then the transition will be profound in its impact on our economy, even
with immigration.
21.
There are no easy solutions as many other
nations also grappling with this challenge have found. Apart from policies aimed at promoting
marriage and parenthood, as well as carefully calibrated immigration, we must
focus our efforts on strengthening the Singaporean core of the workforce. One thrust is to enhance the participation
rates of women and older workers. Another is to enhance the skills of our
workforce. A key initiative to ensure a
sustainable and adept future-ready workforce is the SkillsFuture national
movement. SkillsFuture will help Singaporeans
gain a mastery of skills in the course of his or her life through an integrated
system of education and training, with the support of training providers,
employers and unions. The aim is to
ensure that Singaporeans have deep skills that are continually updated. Hence,
they will be well-equipped to seize the new opportunities afforded by
technology and adapt to shifts in the economic landscape.
Conclusion
22.
These three challenges– the resurgence of
Asia, the impact of disruptive technology, and the need for deeper and
adaptable skills in the workforce– must
be addressed effectively in order to sustain Singapore’s economic journey in
the next few decades.
23.
While the challenges are significant, they
are not insurmountable. And we can draw
a measure of inspiration and optimism from the opportunities that lie ahead, and
our own track record in adapting to changing even convulsive scenarios. That same boldness of vision, courage to go
against the grain, and perseverance in the face of adversity, coupled with our
strong fundamentals, will stand us in good stead as we face the challenges that
lie ahead. On this note, let me once
again congratulate the Singapore Economic Review on you 60th
anniversary, and wish everyone a successful year ahead. Thank you.