SPEECH BY MR CHAN CHUN SING, MINISTER FOR TRADE AND INDUSTRY AT THE INSEAD ALUMNI FORUM, 10 NOVEMBER 2018, 1.30PM, AT GARDENS BY THE BAY
1. A very good afternoon to all friends and family of INSEAD, and a warm welcome to all our guests from overseas.
2. When I heard about your topic for this afternoon - “Business as a Force for Good” - I was intrigued. I was wondering what was the force for good – is it about INSEAD for good, or is it about business for good or is it having the INSEAD graduates as a force for good.
Two Theories on Business as a Force for Good
3. Let me explain why I am intrigued. Not so long ago, it was still quite common to have two competing schools of thought about whether there is a role for business to be a force for good. And there are very respectable arguments on both sides being made. The first school of thought, called the Shareholder Primacy, says the role of business is to create wealth through innovation, production or arbitrage. The wealth that is created shall be distributed to the shareholders and it is up to the shareholders to decide how they will spend it and if they want to do any good with it.
4. So according to this school of thought, it is not the role of businesses to be a force for good. Business is already complex enough. We should focus our minds on creating wealth through innovation, production and arbitrage, and leave the doing of good to the shareholders. This is a rather respectable argument and it has been around for quite some time and I must say that it is still a valid observation.
5. Nowadays, it is more common to hear a second school of thought, and that is perhaps what we call the stakeholder theory. It says that businesses exist within the context of a society and because it exists within the context of a society, it has a responsibility to society. This is quite different from the other school of thought that talks about the stakeholder primacy. And it is because of this second school of thought that you hear about corporate social responsibility.
6. If you have used the term corporate social responsibility and spoken to the people from the first school of thought, corporate social responsibility is an oxymoron. There is no corporate social responsibility - the corporate responsibility is to create wealth and the social responsibility is that of the stakeholders and we should not confuse the two.
7. And to push that further, it has become fashionable to talk about not just corporate social responsibility but also the sense of social mission each and every company must have not for its own sake only, but as a competitive advantage to generate business and contest for talent. Nowadays, if you are a company and you do not inspire your younger generation with a sense of social responsibility, you will not be able to recruit the best and brightest to join you.
8. So indeed we have come quite far, but the verdict seems to be still open as to which school of thought shall prevail in the longer term.
Developments in the Global Economic Environment
9. Against that backdrop, many things are happening in the global economic environment today. We have seen rapid shifts in the global production and value chains. Part of it is caused by geopolitics and part of it caused by technology. The recent US and China trade conflicts have impacted everyone across the world. You talk to the businesses in China, Asia and the US, everybody is making plans, or contingency plans, to adjust their global production chains to ensure business continuity. On the European continent, Brexit is about to happen and we need to prepare for the day after Brexit. What will not change the day after Brexit is that the global production chain and the global value chain can only get more integrated, not less.
10. In today’s dynamic production environment, minus the very basic primary products, it will be very difficult for us to find any complex product that is entirely produced in one single country, no matter how big the country is – not even if it is China, US, or India. Let us take a look at the smart phones that most of you have, that is a product of a global production chain from design, manufacturing, sales and after-sales service.
11. So our assessment is that the world can only get more integrated, and it is good for the world. As economics theory 101 would say, if each and every one of us can make use of our comparative advantage, it will be much more productive for the world. However, those natural forces of integration are being challenged. They are being challenged by geopolitics and a misunderstanding of how countries should run their economic policies.
12. For example, in the growing digital economy, the digital economy is a tremendous opportunity for the world to be even more integrated, not just through the production processes, but the sharing of data, the flow of data, the connectivity of finance. Yet at the same time, we are hearing increasing voices that talk about data localisation where people apply the old concept of geographical borders to the new digital economy that should be borderless. Instead of a more integrated digital world, we face the possibility of the factors of productions becoming fragmented rather than integrated. So that is a big challenge for us. So as we evolve the WTO process to take care of the current challenges in the goods and services sector, we have to start thinking of the new rules in the digital economy.
13. With all these changes, there is also growing concern about the future of work. In many countries, people have started asking whether there will be enough work to go around. In other countries, the question is whether there will be sufficient meaningful work to go around. This is why some countries and cities have started toying with the idea of a universal basic income, because what if we do not have enough work to go around one day? How do we sustain the livelihood of our people, and how do we provide the dignity of work for our people?
14. But let us not delude ourselves. A more integrated, more globalized world requires a lot of adjustments domestically. There will be winners and there will be losers, and there will be people who win a lot, and those who win relatively less. There are differences in absolutes and there are differences in relativities. How a society manages the disparity between the winners and the losers, between those who win more and those who win less, will have domestic political implications with global significance and we have seen this happen in the last few years where the domestic relativities, when not well managed, translate into a global backlash against the natural forces of integration.
15. At this point in time, I would like to encourage everyone to ponder upon this question - if we want to be a force of good, be it INSEAD, businesses or business leaders like yourselves, what does it mean to be a force for good? What can you do and what should we do collectively? Let me offer three suggestions for us to ponder this afternoon.
Role of Corporates and Corporate Leadership
16. First, we have a collective responsibility as business people, or as governments, to uphold and evolve the open rules-based global trading system that has brought us so far. It is not perfect, but it is possibly the best option we have for now. We not only have a collective responsibility to uphold this, but a responsibility to evolve this taking into account the new challenges brought about by data, robotics, by AI (artificial intelligence) and so forth. How do we create a new system that will foster innovation and enable new business models to take root?
17. How do we share the gains from this new economy? There is currently a debate ongoing. Should the gains of all the data and digital economy go to the producer of the data, the people that analyse the data or the people who use the data to provide new products and services. We should not take it as a given that the global trading systems as we know today, and the open rules-based system, will naturally continue on its current trajectory. There are many challenges that require us to come together, discuss and find new solutions on how we can evolve this system where the gains from the global trading system can be shared across the world. Failing which, we risk forces pulling this system apart because if part of the system feels that they are not able to benefit from the system, then they have very little incentive to uphold the system, and will eventually withdraw themselves from the system.
18. I said governments and businesses have a collective responsibility, because today for many large enterprises, your GDP equivalent would be even bigger than many other countries. That means governments and large corporations have a collective responsibility to uphold and evolve this system. So if we want to be a force for good, this is one of the first few things we need to do.
Second Role – Unleash the Potential of the People
19. The second suggestion that we need to consider if we want to be a force for good is how do we build a system that allows the human potential to flourish? How do we build a meritocratic system of talent and trades where each and every individual’s achievement is determined by his talent, effort and commitment, and never by his language, race, religion, ancestry or family ties.
20. This is fundamental for us if we want to be a force for good. Until and unless each and every corporate and society gives hope to its people that they can fulfil their potential without barriers, we will never be able to convince people that businesses or governments are here to do good. We need to speak to the individual aspirations of our people no matter how diverse those aspirations might be. And each generation will have its own challenges to harness the energy of their generation.
Third Role – Imbue Stewardship Values
21. When businesses and governments establish systems to help unleash the potential of our people, we must also then consider the third suggestion - how do we imbue in our people the necessary values for them to also be a force for good? It is necessary but insufficient for INSEAD, the business leaders or yourself to be a force for good because we do not just need a choir of people talking about a force for good. We need more converts and you are the evangelists.
22. When it comes to the third suggestion on values, there are two sets of values that we need our people to consider very carefully and to internalise. The first is that we are a force of good not just for ourselves or our company, but we all have a greater responsibility towards the society that gave us this opportunity to be here in the first place.
23. Second, is the concept of stewardship. Much has been talked about being a force for good, by companies and governments, but we all know it is not so easy to be a force for good. Despite countless seminars and countless good socio-economic theories, why have we not been able to achieve this concept of us being good stewards for our people, country and for this world?
24. That is because most of us are caught in a prisoner’s dilemma. For businesses, the short term, quarterly reporting matters. For governments, the routine democratic processes in trying to survive the next election for most governments matters as well. But how do we transcend this collectively? I have heard business leaders say, ‘I am all for corporate social responsibility only if my competitors will join me’. I have also heard government leaders say, ‘I am all for climate change actions if only the rest of the world will join me’, or for that matter, ‘I am for all this if only you guarantee that I will still be around for the next 10 to 15 years’. We have a challenge and it starts with our own DNA and values. How do we bring about this concept of stewardship and imbue that into the next generation where the definition of our success is not how well we do for ourselves here and now, but the definition of our success is how well we enable our next generation to do even better than us? That is our challenge, and that is a tall order. On that note, I will end off with a story.
25. Today we are all gathered here by the Gardens by the Bay. The ground that you stand on did not exist 50 years ago, this used to be the sea. Every tree planted in this dome and outside in this garden did not exist 50 years ago. If you take a look across the bay, that used to be the shoreline. If you travel around Singapore later, go to Beach Road. Beach Road used to be the road beside the beach, today you cannot see the beach from Beach Road.
26. We had the unique honour of having expanded our country by 40 per cent over the last 50 years without war or conflict. We are also uniquely one of the few, if not the only country, that started our independence journey not by choice. We found ourselves independent on 9 August 1965, and our first order of business was providing enough water to keep alive our population of 2.5million. We started with three reservoirs, and today we have 17 reservoirs including the one that you see behind you.
27. This used to be the mouth of the Singapore and Kallang river. We dammed it up and converted the sea water to fresh water. Today we have 17 reservoirs across the entire Singapore. Two-thirds of the entire Singapore is water catchment areas. We started planting trees because we want to leave behind a better place for the next generation. Nobody in their right mind will reserve the most precious piece of reclaimed land, that we have spent so much to reclaim, for a garden. But we put it as a centerpiece of our nation’s journey into the next lap. We want every generation to treasure this garden. The first piece of development on this reclaimed land - we dedicate it to this garden.
28. Nothing that you see in this garden comes from nature. It is all carefully curated – every single plant and flower that comes from around the world for our people to experience. The energy that we use in this garden comes from this garden. It is an example of what we are striving towards – a zero emission development. The 18 super trees that you see in the garden, one of them has within it a chimney through which we recycle our biomass generated from this garden. This garden is an expression of a closed-loop system, a sustainable solution going forward. It is where we experiment and where we draw inspiration for the next generation.
29. This garden is very much the story of Singapore because if you go down this side of the garden towards Marina Barrage and look out towards the sea, you will see the port of Singapore. You will see one-third of global trade passing by every day. You will see a ship calling at the Singapore port or leaving the Singapore port every three minutes. If you look up to the sky, you will see the planes landing at Changi. You will see a plane taking off and landing at Changi every 80 seconds. If you go up to Marina Bay Sands, on a good day, you will be able to look beyond Singapore and see Malaysia and Indonesia.
30. We are just 700 sqm small but this is the story of how a people from different backgrounds want to build a country regardless of race, language or religion. A country that stands for meritocracy, multi-racialism and incorruptibility. That while we do not have much of a common history, we have much to look forward to together, towards a common set of ideals that will inspire our next generation to overcome the odds that we have. If water was a challenge yesterday, we will turn it into an opportunity tomorrow. And if we have been able to overcome the water challenge in the last 50 years, we look towards overcoming our energy challenge for the next 50 years.
31. And this is why the three suggestions that I posed speak so much to me. We are a small country that relies on the world as our hinterland. The survival of the global trading system will determine our fate and we hope that you will join us in
this journey to uphold and evolve the global trading system. A system that allows the fruition of each and every individual in Singapore is what we stand for, is what binds us and attract people from all over the world to want to come here to be either friend or family or fellow Singaporean.
32. Last but not least, this garden is a testimony of the values we want to pass on to the next generation. And that can be found in one simple word - stewardship. We are but stewards of our generation and if we can imbue our people with that sense of mission and DNA, I am sure that regardless whether we are in government, business or as private individuals, we can all individually and collectively be a force for good.
33. Thank you very much.