Speech by Mr S Iswaran, Minister for Trade and Industry (Industry), at the Economic Society of Singapore (ESS) Singapore Economic Policy Forum 2015 on Thursday, 29 October 2015, 9am, Conrad Centennial Singapore
Professor Euston Quah, President, Economic Society of Singapore,
Excellencies,
Distinguished guests,
Ladies and gentlemen,
Good morning
1. I am pleased to join you at this morning’s Singapore Economic Policy Forum 2015.
2. Milestones are occasions for celebration and reflection. SG50 has been one such unifying milestone for all Singaporeans. We vividly recalled the lessons and achievements of the path we have taken. And we paused to contemplate the journey that lies ahead with the challenges that it might bring.
3. Singapore’s economic transformation is an integral part of our national history. A strong and vibrant has created good jobs and business opportunities; it has provided the resources for investments in public infrastructure and social programmes; and it has enabled higher living standards for all Singaporeans.
4. But our economic story has also been punctuated by bouts of uncertainty. To deal with short term volatility while preparing for the long term, we have had to be nimble in our response and willing to go against the grain. For example, in the 60s, we adopted an open-door policy to attract investments from multinationals to bring in their expertise and technologies, and create jobs for Singaporeans. Since those early years, we have regularly sought new ways to optimise our limited land and labour resources; harness innovation to retool our capabilities; and find new markets for our products and services to unlock economic potential.
Future Economic Challenges
5. Today, we face a more challenging economic environment where slower growth is likely to be the norm. The outlook for growth in global GDP and trade is modest, and value chains in the region are being reconfigured. The IMF has revised its forecast for 2015 global growth to 3.1% which would be the slowest pace of growth since the Global Financial Crisis. We face stronger competition, and need to continue moving towards higher productivity to maintain our value proposition to investors and talent, and sustain economic growth.
6. This requires us to think hard about our future economy and the path towards it. And that will be the focus of the Committee on the Future Economy. Yesterday, Minister Heng Swee Keat, who will chair the committee, mentioned highlighted five aspects or “futures” which we would need to consider at length, pertaining to technology, jobs, markets, resources and companies. These are largely the issues that have also surfaced in our discussions with the business community, trade associations and chambers, labour movement and various other stakeholders.
7. Take, for example, the future of resources, such as labour and land. Our workforce growth is slowing as our population ages and we reach the upper limits of our labour force participation rate. 90 per cent of our land is already built-up or under development. These domestic constraints are increasingly binding, and we will need to make hard choices about where and how we allocate our limited resources to unlock the greatest value in support of a vibrant future economy. We will need to work with Singaporeans to acquire the skills and ready themselves for the demands of the future economy. We will also need to achieve higher land productivity through intensification (above ground/underground/design) and better allocative strategies.
8. Consider also the future of companies. Today, we see developments in technology causing profound disruption to existing business models. One such disruption is the shift towards “virtual-heavy” models that rely less on fixed assets and allows firms to be less bound by geography. For example, Apple has seen success in its fabless manufacturing model, while Alibaba has kept its online shopping platform Taobao “asset-light” by outsourcing warehousing and inventory management. This change is most starkly illustrated by “unicorns” like Uber. Uber develops, markets and operates a mobile app which allows consumers with smartphones to submit a trip request which is then routed to Uber drivers who use their own cars. It has severely disrupted traditional taxi businesses in many cities. Last December, Uber raised US$1.2bn of equity capital at a valuation of US$41bn. In contrast, Delta Airlines, which owns and operates a fleet of over 800 aircrafts had a market capitalisation of about US$40bn yesterday. (We have a regional equivalent called GrabTaxi.)
9. Uberification and other trends will pose novel forms of competitive challenge to our companies, but also present new opportunities. We must ensure that Singapore has a thriving enterprise eco-system and enabling environment that allows up-starts like Uber or GrabTaxi to emerge and scale, even as SMEs, LLEs and MNCs continue to strengthen their capabilities and grow.
Seizing Opportunities, Navigating Challenges
10. In an environment where growth is likely to be weaker, domestic constraints are tightening, and technological trends are poised to disrupt existing ways of doing business, we need to shift from simply adding value to creating value in order to unlock future economic potential. That means originating ideas, design and branding, and innovation to create new products/services as the basis for value. It would allow Singapore to be the base for entrepreneurship and innovation, and anchor our position as a trusted global-Asia node with a unique value proposition. I believe that there three modalities to improve the scope for value creation in Singapore.
11. First, we must continue to use our size as an advantage, to ensure a quick, effective and coordinated response to complex, multi-dimensional issues. Take, for example, our recent efforts in SkillsFuture, which aim to achieve multiple objectives, such as addressing the future of jobs, meeting individual aspirations, maximising human capital, and developing a culture of lifelong learning.
12. SkillsFuture is a complex undertaking, and we are working closely across government agencies as well as with industry, unions, and educational and training partners in order to achieve these objectives. We have formed Sectoral Tripartite Committees comprising representatives from the government, industry and unions, to co-create Sectoral Manpower Plans in each of our SkillsFuture sectors. These plans chart out the future direction for the sectors, the skills which our workers would need, as well as the pathways that would allow workers to progress in their careers.
13. The SkillsFuture initiative is building up momentum, and must continue to capitalise on our ability to be quick on our feet in response to new developments. We will continue to engage our tripartite partners extensively, and adjust our policies to generate the best possible outcomes for Singapore and Singaporeans.
14. Second, we must nurture broader and deeper public-private partnerships to generate economic value. The scope for such collaboration is perhaps illustrated in the area of innovation. Innovation is a multi-stage process, from R&D to commercialisation to business outcomes involving multiple stakeholders. Collaboration is crucial to ensuring that the innovation process results in viable economic outcomes. The heightened risk and declining productivity of proprietary research is causing many companies, in fields as diverse as pharmaceuticals and engineering, to embrace open innovation.
15. Our public sector researchers work with many industry partners – foreign and local, large and small – to build new capabilities and products. For example, A*STAR’s Advanced Semiconductor Joint Labs were formed by A*STAR’s Institute of Microelectronics (IME) and 10 industry partners. These labs will enable our industry partners to tap on a range of capabilities in semiconductor research to address issues faced by the industry, such as enhancing chip performance while reducing their manufacturing cost. The labs will also look at technological breakthroughs in integrated chip design that could propel our companies to the forefront of the industry.
16. Such collaborative innovation allows our companies to stretch their R & D dollar, find new revenue streams to improve their topline, and improve operational efficiency. Overall, this will enable our companies to raise productivity, increase profits, and remain viable over the longer term. We must continue to pave the way for companies to collaborate with public institutions and each other.
17. Finally, we must nurture new capabilities to rise above our constraints, harness future market opportunities and compete globally. This is evident, for example, in our approach towards developing new growth clusters, such as smart & sustainable urban solutions, which also provides opportunities for our companies to internationalise and our people to build deeper skills through overseas exposure.
18. Rapid urbanisation has led to an increase in demand for sustainable solutions and technologies globally. The number of urban dwellers in the world is projected to increase from 3.6 billion in 2011 to 6.4 billion by 2050. By then, 70% of the world’s population would be living in cities. In addition to urbanisation, there is also increasing need to mitigate environmental degradation, accommodate an ageing population and meet greater citizen expectations for better government services.
19. As a small city-state, Singapore has had to develop its own solutions to address constraints such as the scarcity of land and lack of natural resources. In doing so, we have come up with innovative solutions in areas such as water & environment, urban planning and green buildings. These solutions can be scaled and exported to the region and beyond. Just last week I was in India to witness the Foundation Laying Ceremony of Andhra Pradesh’s new capital city Amaravati. Our companies are rendering their expertise and partnering the government of Andhra Pradesh to help masterplan and develop Amaravati as a people-centric, environmentally sustainable and highly liveable city.
20. Our procurement practices, R&D initiatives, and regulatory environment can help position Singapore as a test bed for the development of new solutions in these and other domains such as cleantech, energy/LNG, and applied health sciences. This in turn will allow us to turn our constraints into opportunities, and enable our companies to tap on new markets overseas.
Conclusion
21. Our ability to coordinate internally, collaborate between the public and private sectors, and nurture new capabilities to compete globally are important sources of comparative advantage for Singapore, and the Government is committed to building on them for the future. These are some of the issues that the Committee on the Future Economy will need to address. The Committee will canvass widely for views and we welcome all perspectives, from academics, businessmen and unionists, on how to best position our economy for the future. I wish you all a productive session at the Economic Policy Forum 2015.