Ladies and gentlemen,
1. Thank you for inviting me to be here this morning to share at this NCAPEC Executive Forum. This is a timely forum for us to come together to exchange views on the state of the global economy, the Singapore economy and the way forward in the digital economy. I hope that after this speech, we can have the chance to exchange views on what are the opportunities and challenges that we are now confronting. Let us take a step back and review the global economy.
What are the challenges facing the economy?
2. Global growth is expected to slow this year. The IMF has progressively downgraded its forecast for 2019 global growth since October last year, with the latest forecast coming in at 3.3 per cent, which is lower than the 3.6 per cent growth achieved in 2018. Weaker global demand, the ongoing trade conflict between the US and China, as well as the downturn in the global electronics cycle, are all expected to lead to a slowdown in global trade this year.
3. At the same time, uncertainties and downside risks in the global economy remain:
a. First, there is a possibility of a further escalation of the US-China trade conflict, spilling into other areas beyond trade, including technology. The US has made threats to impose more tariffs on the remaining merchandise imports from China and China has also hardened its stance. Should this happen, there will be further disruptions and a re-organisation of the global supply chains. Hopefully, not a bifurcation or a balkanisation of global supply chains.
b. Second, there is a risk of a sharper-than-expected slowdown in the Chinese economy, which could in turn be precipitated by the imposition of further tariffs by the US.
c. Third, Brexit-related uncertainties in the UK and EU remain.
d. Fourth, the WTO system is under stress. By the end of this year, the WTO Appellate Body may also be unable to function given the deadlock in appointing new judges. This will negatively impact global investors’ confidence.
4. These uncertainties, if prolonged, could have a negative effect on global business confidence and consumer sentiments. This could in turn dampen trade, investments and consumer spending, with knock-on impact on economic growth and ultimately, jobs.
What can we expect in the near future?
5. As a small economy, Singapore is not immune to these developments.
a. Weaker global demand conditions are expected to weigh on Singapore’s economic growth this year. After posting growth of 3.1 per cent last year, the Singapore economy expanded by a slower 1.2 per cent year-on-year in the first quarter of the year, as both the manufacturing and wholesale & retail trade sectors contracted.
b. Recent data suggests that outward-oriented sectors in Singapore will likely remain weak given the global situation. For example, the manufacturing Purchasing Managers’ Index dipped into negative territory in May, the first time since August 2016, on the back of a deterioration in the new orders sub-index. Our exports performance has also been weaker, with non-oil domestic exports contracting by 10.0 and over 15 per cent on a year-on-year basis in April and May respectively, following a decline of 6.4 per cent in the first quarter of the year.
6. While we hope that the US and China can resolve their differences amicably, the ongoing tensions are a manifestation of fundamental political and economic differences between the two countries, which will take time to resolve. We can thus expect the global economic uncertainties and resulting drag on growth to persist. Against this backdrop, we should brace ourselves for greater economic headwinds in the year ahead.
What must we do to address these challenges?
7. I know there is much anxiety about the state of our economy and the global economy. Workers are understandably worried about what slower growth means for their jobs, both in the short term and in the long term. While businesses are concerned about the impact on their profitability and operations, and on a longer term, how do they organise their supply chains and penetrate new markets. All these concerns are reasonable and within expectations.
8. However, all of us, including Singaporeans should stay alert but not afraid. While the journey ahead of us may be challenging, we have what it takes to tackle these challenges head-on. For Singapore, our strong fundamentals and economic strategies will put us in good stead and will allow us to distinguish ourselves to capture the new opportunities available. Let me elaborate on some of these new opportunities:
a. First, Singapore continues to be a safe harbour for companies looking to invest in the region and we are seen as a hub for talent, intellectual property protection, innovation and R&D. We maintain a principled stance on issues, even in an increasingly polarising environment due to ongoing trade tensions, and we continue to stand for free trade. This, combined with our skilled workforce, progressive regulations and pro-business environment, have contributed to the strong fundamentals of Singapore.
b. Second, to ensure a predictable, stable trading environment, our priority is to work with like-minded partners to uphold and uplift an international rules-based trading system.
i. At the WTO, Singapore is playing a role in ongoing discussions on reform of the WTO to ensure it remains relevant. We are also leading the work, along with Australia and Japan, to create new rules on E-commerce under the Joint Statement on E-commerce Initiative (JSI), which now has the support of 78 countries – including the US, China, the EU, a number of ASEAN countries, with the latest being Saudi Arabia. We are pleased with the level of interest that has been generated so far and the active discussions that have taken place. There has also been much interest in Singapore’s work with New Zealand and Chile on the Digital Economy Partnership Agreement (DEPA). On the bilateral front, Singapore is also collaborating closely with Australia on the digital economy.
ii. We are also deepening our international connections both regionally and bilaterally through the various agreements and initiatives such as the CPTPP, the RCEP and collaborations with countries on the digital economy. I just came back from Bangkok and I think it is very clear to all the ASEAN member countries that there is great need, a great urgency for us to conclude the RCEP this year. We hope that we will be able to make progress with the ASEAN FTA partners, who are interested in the RCEP, to be concluded this year. We have made progress on the expectations that we have under this year’s schedule. All this work will ensure that we are not only diversified as an economy, but we also have a proper international regulatory infrastructure in place to help businesses in these uncertain times.
c. Third, in Singapore we are looking to ensure that our skilled workforce can continue to adapt and take advantage of the opportunities that we can create. For example, digitalisation and the use of new technologies such as A.I. will not only create new business prospects but also allow businesses, including SMEs, to improve productivity, scale up and internationalise into new markets more easily and quickly. The potential on the digital economy front is tremendous and our people must be ready. The digital economy is the next frontier for the Singapore economy to transcend our geography and geographical size. Ever since the independence of Singapore, connectivity to the rest of the world has been our lifeline. But in the past, connectivity referred to only the three dimensions of air, land and sea connectivity. Today, these three dimensions of connectivity must be connected with the five non-physical levels of connectivity in order to mutually reinforce one another. And these five dimensions of non-physical connectivity that will define the next platform of the Singapore economy include financial connectivity, data connectivity, talent connectivity, technological connectivity and regulatory connectivity. Today, when Singapore looks at trade connectivity, we no longer just look at it on the physical front. Instead, we look at these eight dimensions as mutually reinforcing each other in order for us to further distinguish ourselves from the competition.
i. We are investing heavily in the education and training of our workforce. Take for example, AI Singapore (AISG), which was set up to boost our capabilities in A.I. Under AISG we have apprenticeship programmes for students and fresh graduates, and training programmes for working professionals who want to transit to a new job. In Singapore, for us to invest in the education and training of our people, it is a lifelong process. Our belief is that, 15 years of education that will prepare them for the first job is necessary but insufficient. Instead, we have to complement compulsory education with continuing education. In the lifetime of a typical Singaporean, we will easily invest more than a quarter million dollars in their training and education. This is likely to go up, even as the challenges rise. But we are committed to making sure that our people can keep pace with the demands of the new economy. We do not believe in protecting jobs. We believe in protecting workers. And the best way to protect our workers is to make sure that they have the skills, including the digital skills necessary, for the next platform of global competition.
9. Businesses also have a role to play. Companies must similarly invest in their own training structures and processes to ensure that potential employees have the right skills for the job. Public-Private education partnerships are invaluable in this regard and the government is already embarking on such partnerships with companies to support the Skills Future movement. Businesses also need to expand their horizons and venture into new emerging markets to fully tap on the opportunities in the global economy. They need to be ready to take the risk, and the government will do what we can to help the internationalisation of our companies. Finally, business leaders also have an important role to help shape their respective governments’ stance towards greater digital integration and the upholding of a rules-based global economy.
10. There is a role for all of you present here as business leaders. Your role covers the following. First, you have a role to play in training the workers to help them prepare for the next level, as part of the wider ecosystem. Second, you also have a role to help Governments understand the challenges and opportunities of the new digital economy. Not all governments have an equal and clear understanding of the challenges and opportunities in the digital space. Some still look at the digital economy from the lenses of the conventional economy – which is that data is almost like a material - atangible, where the consumption of data is seen as subtractive i.e. “if I have it, you can’t have it”. Therefore, they wrongly impose the wrong concept on the flow of data. Artificial geographical boundaries are applied to the concept of data. All these cannot be more wrong.
11. All of you in this room, as practitioners in the digital economy, you will know more and you will know better than anyone else that data is not a conventional commodity. Consumption of data is not subtractive. It is instead additive, if not multiplicative. The more we allow the free flow of data, with privacy and security considerations taken in, the more we allow the world to be integrated through data and the digital space, the greater the opportunities for the global economy in the next platform. My consumption of data, my sharing of data with you, does not deprive anyone else of the data. Instead, through the integration, we can all produce new ideas, new products, new services, for the market.
12. This is an important role for corporate leaders like yourselves, to make a pitch to the respective governments on how they should see data. Ultimately, if the digital economy is the way forward, how we are able to integrate the digital space will be a reflection on how we are able to keep the global economy integrated, allowing respective countries to leverage their comparative advantages, for the good of all mankind. However, we run the risk that in today’s world, if we apply the wrong concept and fragment, fracture or balkanise the data space, then we are all poorer for it. This will have an impact not just on the digital economy; this will also have an impact on the conventional economy. Because in today’s world, the conventional economy is closely intertwined with the digital economy.
13. In conclusion, whilst there are headwinds ahead of us, Singapore remains confident. We remain confident that we can focus on our fundamentals, the long term fundamentals, and not just the short term perturbations. We are confident that if we can seize the opportunities presented by the digital economy, together with global operations like yours, we can build a better world for ourselves and for the world. We would like to join hands with you to help bring about that environment for businesses to thrive and for businesses to generate new and better ideas in service of our community.
14. Thank you very much.