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Oral reply to PQ on side effects of a US-China trade standoff

Oral reply to PQ on side effects of a US-China trade standoff

Question

Mr Christopher de Souza: To ask the Minister for Trade and Industry how Singapore-based SMEs, Regional HQs, MNCs and the workforce can protect themselves from the side effects of a US-China trade standoff and how can capitalising on innovation help these organisations overcome such side effects.

Oral Answer (to be attributed to Minister for Trade & Industry Mr Chan Chun Sing)

1. Mr Speaker Sir, let me answer the question in two parts. First, I will explain why the choice of words, ‘US-China’ and ‘trade conflict’, are not exactly very precise. The second part, I will answer what we need to do as a country and as companies.

2. Let me touch on the first part. Today, the challenges that we are facing on the external environment are not exactly limited to only the tensions between the US and China. The uncertainties around the world have gone beyond the US and China. It includes the uncertainties with Brexit, Japan and Korea, Hong Kong and others. It has also affected the functioning of the World Trade Organisation (WTO) system, of which the challenges to the continued functioning of the appellate body is a serious concern for all of us. So it is not just about US and China.

3. The second part is that it is also not just about the trade war. The competition between the US and China today has gone beyond trade to encompass technology and other issues. So it is a more multi-faceted challenge that we are dealing with. Now with that as the backdrop, the question is how do we as a country and as companies adapt and adjust our strategy, amidst all these uncertainties.

4. Let me touch on a three-pronged strategy that we need to adopt: diversification, innovation and investment, and training.

a. Let me elaborate on diversification. 

i. To manage the uncertainties ahead of us which may take quite a while to settle down, we should continuously diversify our markets, our supply chains and our product mix. For the diversification of the markets, we must always remember that there are still many parts of the world that are experiencing strong and positive growth. This is the reason why MTI, with the economic agencies, will continue to diversify our portfolio, our free trade agreements (FTAs), both in terms of the number of FTAs and the quality of the FTAs, in order for our companies to access the markets around the world, especially those with strong and positive growth.

ii. The second part of diversification has to do with supply chains. In this world of flux, supply chains might be disrupted because of economic and political reasons. This is why the economic agencies are working closely with all our companies to make sure that our sources of materials, labour and other factors of production will continuously stay robust and resilient amidst these shifting geopolitical tensions.

iii. Last but not least, we must continue to diversify our product mix as an economy. We must make sure that no one particular sector dominates the economy to the extent that it causes us to be much more fragile than we need be. This is how we have approached the situation over the last many years. And if we look at the numbers today, there are some sectors like electronics, precision engineering, wholesale trade, and retail which are down. There also sectors like the information & communications sector, the biomedical sector and professional services sector that are still up. So, that diversification of our economy and product mix actually helps us stabilise the overall economic performance. 

b. The second strategy that we need to adopt amidst all this flux is to make sure that we continue to innovate and invest.

i. First, we must make sure that we continuously do better to translate our research outcomes to enterprises. We must complete the research, innovation and enterprise cycle – not a chain, but a cycle. We must build real capabilities beyond building capacities. We must compete on the basis of real capabilities rather than just capacities. For countries that are much bigger than us with much stronger and a more diverse resource base, they might compete on the basis of capacities. But for us, we must compete on the basis of capabilities. It is often said that many countries are competing in the area of low mix high volume products. That has a lot to do with capacity. For us, if we are to be serious in competing in the area of high mix low volume products, then research and innovation, intellectual property protection and quality standards are all very important, and those play to our strengths.

ii. The second thing that we need to invest much more in is the adoption and proliferation of our digital platforms, especially among the SMEs within our economy. These are not very difficult solution sets. They are available in the market, and we are committed to work with our Trade Associations & Chambers (TACs) to make sure that we accelerate the pace of adoption. When we achieve critical mass, it will also bring about a virtuous cycle for us to reduce the price of adoption and allow businesses to do business with one another more easily.

iii. Last but not least, with or without the current challenges amidst the global uncertainties, we must continuously look at our production system and processes and there is always room for us to innovate in such things beyond the innovation of products. It is about the innovation in systems and processes that can make us more productive. 

5. The third point of the strategy has to do with training. There are three sub-parts to the training strategy which we need to focus on.

a. We have often talked about the training of our workers and that is well-known, and we will continue to invest heavily in the training of our workers especially in the acquisition of skills for our Industry 4.0 journey, digital platforms, and so forth. This is an area where SSG, WSG, NTUC and TACs must work closely together to bring the level of skills of our workers up to speed with what is required by the markets. Having said that, it is necessary but insufficient to focus only on workers’ training.

b. We also need to focus more heavily on the training of the leadership teams in the respective companies. This is an area I have discussed with the many TACs and we can do much more. From my own experience in NTUC, before we even talk about the training of the workers, it is most important for us to open up the vision of the management team. For example, in the recent roll out of the Scale-up Singapore initiative, we did not focus just on the workers’ training. We focused on the training of the management team by getting the entire management team to do their envisioning and change management exercises together before we even talked about the workers’ training.

c. Last but not least, when it comes to training, we will have to do much more to better organise ourselves and respective agencies, from the TACs to overseas missions to EDB and ESG and other economic agencies, so that we can combine the market knowledge that we have to help our enterprises to diversify their markets beyond Singapore.

6. Mr Speaker Sir, in short, I think the current situation warrants us to take a close look at how we develop our companies and economies, and we must go beyond looking at just the US-China issues or looking at it as just a trade issue. There are various things that we must do, regardless of whether it is US-China or the trade issue. Continue to diversify our markets, continue to diversify our supply chains and product mix, continue to invest in innovation, and build real capabilities and not just capacities. Focus on the training not just of the workers but of the management teams, and focus on sharing market knowledge with all our available agencies. 

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