SPEECH BY MR S. ISWARAN, MINISTER OF TRADE AND INDUSTRY (INDUSTRY), AT THE MILKEN INSTITUTE ASIA SUMMIT 2017 ON 14 SEPTEMBER 2017, 8AM, FOUR SEASONS HOTEL
Distinguished Guests,
Ladies and Gentlemen,
Good morning.
INTRODUCTION
1. It is a pleasure to join you this morning at the Milken Institute Asia Summit. Let me begin by extending a warm welcome to all of you to Singapore and our Formula One weekend, especially those who have joined us from overseas.
2. I would like to congratulate the Milken Institute on its 4th Asia Summit. The theme you have chosen, a 20/20 perspective, is apposite for it affords a review of the impact of the past two decades on this vast continent, while casting our eyes to the future and contemplating what the next 20 years might hold for Asia.
3. 1997 was a pivotal year for Asia. It was the year of the Asian Financial Crisis which foreshadowed the resignation of President Soeharto and a political upheaval in Indonesia. It was the year Hong Kong was handed over from Great Britain to China. A pall of uncertainty hung over the region with profound questions over economic sustainability and political stability.
4. The change since then has been nothing short of dramatic. Today, Asia is one of the fastest growing regions in the world and the centre of gravity for global growth. It is projected to grow at about 6% this year, compared to 2% in advanced economies. ASEAN, with Indonesia as its largest member, continues to grow steadily and could be among the 5 largest single markets in the world by 2050, including EU, US, China and India.
GROWTH AND URBANISATION IN ASIA
5. Asia’s growth has been marked by rapid urbanisation and its rising middle class. A 2017 report by the Brookings Institution expects that almost 90% of the next billion entrants into the global middle class will be from Asia, with Asians accounting for two-thirds of the global middle class population by 2030.
6. The global rise of “megacities” (defined by the United Nations (UN) as urban areas with populations of at least 10 million) will also drive demand for urban solutions and infrastructure. According to a UN data booklet on The World’s Cities in 2016, there were 31 megacities globally in 2016, with China and India alone being home to six and five, respectively. By 2030, the number of megacities is projected to rise to 41, with six of the 10 new megacities being in Asia. McKinsey estimates that the resultant demand for infrastructure and urban solutions particularly in China, Southeast Asia and South Asia, will grow by US$20 trillion between 2016 and 2030.
7. But Asia is not a homogenous monolith; it will always be a region of diverse historical lineage, rich cultural diversity and varied political traditions. And Asia’s economic evolution merits detailed and nuanced analysis. For example, Asia is moving up the economic value chain. One measure is China’s value-added share of its own manufacturing exports, which has risen from less than half in 2000 to about 60% in 2011, and is likely even higher today.
8. Increasingly, growth in the region emanates not just from the familiar major cities, but also, and in many cases more so, from the next tier of cities and regions. In China, this includes the Central and Western regions; in India, secondary cities like Coimbatore, Pune and Jaipur; and in Indonesia, cities like Semarang and Medan. For instance, the real GDP growth of China’s Tier 2 and Tier 3 cities have outpaced that of China’s Tier 1 cities over the past decade.
DIGITALISATION
9. The other noteworthy trend in Asia is the pace at which the economy is being digitalised. Asians have been eager adopters of technology, and embraced the new opportunities and degrees of freedom of a digital economy. Cashless payments and biometric systems are noteworthy examples.
10. China is the world's largest and fastest-growing market for proximity mobile payments. China had about 470 million mobile payment users last year, a 30% increase compared to 2015, and representing two-thirds of all mobile phone users in the country, according to the China Internet Network Information Centre.
11. India has introduced its biometric Aadhar identity system, under which a unique 12-digit number is issued to Indian residents based on their biometric and demographic information. Today, more than a billion Indian residents have been enrolled under Aadhar.
12. Aligned with the idea of Asia’s next tier cities holding great untapped potential, these cities will likely also be the future markets of growth in the digital sphere. According to a 2016 report by the Internet and Mobile Association of India (IAMAI) and market research firm IMRB, between 2015 and 2016, the number of Internet users grew almost three times faster in rural India than urban India, at 26% and 9% respectively.
ADAPTING TO THE CHANGES AND CHALLENGES IN ASIA
13. These changes, and their pace, are unprecedented. They have a profound impact on the economy, industries, business models and jobs – around the world. To sustain growth and competitiveness, it is imperative that we adapt to stay relevant. Let me highlight a few key strategies that Singapore has adopted.
14. First, investing in our people and equipping them with the necessary skills. Technology is changing the very nature of our jobs. The digitalisation of manufacturing, for example, is creating higher quality, but fewer jobs. Hence, Governments must pay close attention to bridging structural skills gaps. This is particularly important to ensure that workers are able to tap the benefits of a digitalised and globalised world, rather than be left behind by emerging technology.
15. Singapore launched the national SkillsFuture movement in 2014. To support lifelong learning by our workers, we have developed skills frameworks for different industries to help workers and employers better appreciate the need for continual skills development. We have also ensured that the skills developed are industry-relevant by having employers play a key role in the development of courses, curriculum and the learning environment.
16. Second, taking deliberate steps to stay relevant and develop enterprises with deep capabilities in this increasingly digitalised world. The Singapore Government is harnessing regulatory flexibility and lead demand to help businesses test-bed new solutions. We have launched a FinTech sandbox for companies to test/validate their solutions before they are launched in the wider market. Singapore has also embarked on a Smart Nation initiative, to improve the quality of life of our people using technology. These initiatives include moving towards a cashless society with contactless payment, tech-enabled solutions for homes, as well as open data and analytics for urban transportation. Our Land Transport Authority (LTA), for example, allows for the testing of self-driving vehicles at one-north. Our Public Utilities Board and research institutions are also working with Hyflux Ltd to develop and pilot innovative water technologies, which can be adopted in many projects around the world.
17. Third, protecting the environment. With urbanisation placing increasing pressure on the environment and affecting our quality of life, it is vital that we focus on long-term sustainability. To this end, Singapore launched the Sustainable Singapore Blueprint 2015 to outline our national vision and plans for a more liveable and sustainable Singapore. The Blueprint sets outs targets for key environmental issues, such as green and blue spaces, resource sustainability, air quality, as well as community stewardship.
18. On a related note, Asia has made meaningful progress in environmental sustainability recently. For instance, China and India are currently on track to achieve their climate targets set for the Paris Agreement, and have even surpassed the US to top the latest Ernst & Young Renewable Energy Country Attractiveness Index (RECAI).
19. I am sure Mr Al Gore will have many interesting insights to share on this topic in the next segment on Leading the Charge for Environmental Action.
CONCLUSION
20. Let me conclude. Asia has changed dramatically over the past 20 years, and looks set to continue on its trajectory of growth on the back of robust domestic demand. It continues to present significant opportunities, especially from its relatively untapped next tier cities and regions. As Asia continues to grow and mature, it is important that the rest of the world continues to be engaged in the region, so that we may continue to leverage each other’s strengths and work for mutual benefit, underpinned by mutual respect and trust. I wish you a fruitful Summit.