Ladies and Gentlemen,
1. Good morning, I am pleased to join you for the 5th RHT ASEAN Summit. This is a very timely opportunity for business leaders from around the world to convene to exchange views on the global economy, and ways for companies to refine their strategies to capitalise on the opportunities.
WHAT ARE THE CHALLENGES FACING THE ECONOMY?
2. We are operating within an increasingly weaker and uncertain global economic environment. Since the start of the year, the IMF has downgraded its forecast for 2019 global GDP growth three times – from 3.5% in January to 3.3% in April, to 3.2% in July, and finally 3.0% in October – the lowest level in a decade.
a. The ongoing trade war, which has since evolved and extended to competition in the technology space, is a key concern to all of us globally. The risk from this trade war moving to something larger than just trade and frankly maybe even larger than just technology is twofold. First, moves to restrict the supply of critical production technologies could potentially lead to disruptions in global supply chains; and second, on the digital front, the fragmentation of the digital space into different blocs could lead to reduced interoperability, resulting in increased business costs and a more challenging trading environment for everyone. It is a global economy – supply chains are intertwined and interdependent. But if we are forced to put barriers to separate the supply chains, I think there will be pain for everyone. I don’t believe there will be any winners, I think it will be lose-lose for everybody.
While the US and China had recently reached an interim agreement, uncertainties remain as the exact terms are still under discussion. It is also unclear if the interim agreement would resolve the underlying tensions between the world’s two largest economies. As we discussed earlier, it is not just a trade war or even a technology war. At the core of it, there is a deep mistrust, a strategic lack of trust and perhaps a contest for global dominance that is driving many of these ongoing tensions.
b. Another concern is that the rules-based international order, which was put in place to ensure the stability and advancement of trade through consensus-building is now being challenged. Should multilateral institutions like the WTO be unable to fulfil their mandate, this could be bad for everyone but especially devastating to small countries like Singapore who rely on the transparent framework of rules for a stable trading environment.
c. The deadline for Brexit is just around the corner on 31 October. The EU will decide by the end of this week whether a Brexit deal is possible. If there is no deal by 19 October, the UK Prime Minister is required to request for a delay to Brexit. Should this be the case, the global economy will continue to be weighed down by this additional cloud of uncertainty.
3. As an economy that is heavily reliant on global trade, Singapore is certainly not immune to these global developments, and our export-oriented economy with trade at more than threetimes our economy has likewise suffered. In the third quarter of 2019, our economy grew by 0.1%, narrowly missing a recession and this is on a year-on-year basis and is the same pace of growth as in the previous quarter.
4. Let me now move to what we can do. Despite this rather gloomy outlook, the silver lining is that Southeast Asia still holds plenty of business potential and expansion opportunities for both countries in this region and also companies.
a. Southeast Asia remains one of the fastest growing regions in the world with economic growth continuing to average more than 5 per cent. This is above the global average and is expected to continue for the near future. By 2030, ASEAN is expected to be the 4th largest market in the world. But I always remind myself and my colleagues that potential is different from results. You have the potential to be the 4th largest economy, we have the potential to be a fast-growing region with lots of opportunities for our companies and our people. But can we translate potential into results? Vision into reality? That is the key question.
b. Within the region, bright spots range across sectors such as automotive, financial services, construction, e-commerce and tourism. I think there is a lot of scope for growth.The internet economy in Southeast Asia has grown to USD 100 billion in 2019, more than triple than the last four years. Should this trend continue, the internet economy is on track to hit USD 300 billion by 2025, largely driven by the significant growth in the e-commerce and the ride-hailing sectors.
POSITIONING SINGAPORE FOR THE FUTURE
5. While the challenges may seem formidable, we must remain optimistic. These challenges are also not insurmountable. If we are able to work together and leverage our strong fundamentals centred on Trust, Connectivity and Talent, the region, especially Singapore, has what it takes to tackle these challenges head-on. Our strong fundamentals and economic strategies will give us the foundation to be able to weather these economic headwinds, and differentiate ourselves to capture the opportunities in the region. Let me elaborate.
6. First, Singapore continues to be a trusted partner to both local and international companies. Our pro-business environment, regulated by the rule of law maintains a safe harbour for companies looking to invest in Southeast Asia. We are also a hub for talent, intellectual property protection, innovation and R&D. In uncertain times, I believe that there may be a flight to safety and people will look for safe harbours. And I hope Singapore will be one of these key nodes, especially for Southeast Asia. Our politically stable environment also continues to facilitate companies’ to make their long-term investment decisions. This is something that is not new; it is something which we have continued from the beginning.
7. I remember when I was serving as Principle Private Secretary to Mr Lee Kuan Yew, he met some of the oil majors and he shared this story with them. During the oil crisis in the 1970s, Singapore made one very critical decision that differentiated us from many countries in the region which was – we didn’t take over the oil. We respected the rule of law, the contracts that we had signed. The property belongs to the oil companies. The property and investments were all protected. So whether in good times or bad times, we stick to the rule of law. We stand by the contracts and the agreements that we have signed. That gave companies confidence that this is a place where after you have signed and you have invested, we don’t change goal posts. We don’t tear up the contract and say that it is no longer valid. We respect the rule of law, we respect the contracts that we have signed, we stick to those terms. And I think that is important. It sounds very obvious and maybe to lawyers, you may think that should be the case. But if you look around at what is happening around the world, is that always the case? There is a big difference between theory and reality. But in Singapore, this is something which we must continue to uphold. The rule of law and the sanctity of contracts. We mean what we say, we say what we mean. Once we have agreed, we stick to it. So these aspects, combined with our skilled workforce have allowed Singapore to emerge as the world’s most competitive economy in 2019. But as commentators have pointed out, we shouldn’t take that as a sign that everything is fine, everything is perfect and rest on our laurels. We should be looking at what are the areas that we didn’t do so well and try to improve in those areas.
a. So within the first six months of 2019, Singapore has attracted nearly S$8.1 billion in fixed asset investment (FAI) commitments in manufacturing and services. This does not include the expansion of the two integrated resorts, which add up to more than S$9 billion and will create around 5,000 direct jobs.
b. In July this year, Finnish oil company Neste announced a S$2.15 billion investment plan for the expansion of its renewable energy plant in Singapore, citing pull factors such as Singapore’s good geography, business environment, and the skills of our workforce.
c. As many of you are aware, Dyson recently announced that they will cancel their plans to manufacture electric vehicles (EV). We accept this as part of the ups and downs in a fast-moving business world. Dyson has explained the reasons for their decision and within Singapore we know that this will have minimal impact on their current operations and the workforce here in Singapore.
i. The have about 20 employees from the automotive division, out of a total workforce of 1200 in Singapore. And these 20 employees will be affected by this decision and will be redeployed to alternative roles within Dyson.
ii. More importantly, Singapore will continue to play a key role in Dyson’s expansion plans. Dyson intends to increase their presence in Singapore by growing their core business in areas such as sensor technology, robotics and artificial intelligence. We continue to do business, continue to cooperate, maybe not in electric vehicles, but in other areas.
iii. Dyson is also looking to expand their research, manufacturing and commercial teams in Singapore which will create more jobs for Singaporeans.
d. So I cite these examples to give you a sense that things are still happening, we are still able to attract investments, we are still able to work with our industry partners to grow the economy and create jobs for Singaporeans. That is the commitment that this Government will make, both to our people, in terms of providing good job opportunities, and also to our investors, that Singapore will remain a good place for you to invest, a good place for you to expand your business, a good place for you to use as a hub for the region.
8. That brings me to the second point which is Connectivity. We will continue to build on our extensive connectivity by working with like-minded partners to deepen economic cooperation, strengthen regional integration and support multilateral institutions. This is so that our companies, and by our companies, I don’t just mean locally owned companies, I also mean companies that are from overseas that are investing in Singapore, we treat you as Singapore-based companies. You are Singapore companies. We will work with our companies and make sure that they can enjoy the benefits of an inclusive and predictable international trading environment.
a. For example, Singapore proactively participates in ongoing discussions on the reform of the WTO to ensure it remains relevant. We are quite clear that the WTO is not perfect. Some of the rules need to be updated to reflect the latest developments in the global economy like technology changes. That is important. But we shouldn’t throw the baby out with the bathwater and discard an important institution like the WTO. That will be a mistake.
b. At the same time, we continue to pursue regional and bilateral free trade agreements.
i. Singapore ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2018. ASEAN and our FTA partners are also pressing on with efforts to reach substantive conclusion of the Regional Comprehensive Economic Partnership (RCEP). Although it is still a bit uncertain about how this will go, whether it is the CPTPP, RCEP or many of the other bilateral and multilateral free trade agreements, we will press on. And we are happy to work with like-minded partners and countries who are interested to sign agreements with us, who are interested to uphold this multilateral rules-based trading system.
ii. Singapore is also looking to deepen our trade and investment linkages with China through a number of significant bilateral initiatives. For instance,
• Singapore and China recently announced the ratification of the China-Singapore FTA (CSFTA) upgrade during the 15th Joint Council for the Bilateral Cooperation (JCBC). The upgraded CSFTA will allow our businesses to enjoy greater ease when doing business in China and is also an important signal of Singapore and China's commitment to free and open trade.
• Another major ongoing bilateral project is the Chongqing Connectivity Initiative (CCI), which aims to further develop China’s western region and improve Chongqing’s physical and digital connectivity to Southeast Asia and beyond. This initiative enhances G-to-G cooperation in priority areas such as financial services, aviation, transport & logistics and information and communications technology.
• It is a bit different from our first two projects with them. We started with Suzhou, which is an Industrial Park and the second project was Tianjin Eco-City. This is the third G-to-G project and it focuses not on the physical site, the physical location, but on enhancing the connectivity and capability in modern services. The reason why we keep changing the nature of projects over the years is because we are moving in tandem with the changing needs in China. What China requires at the different stages of its development will change. Therefore, we have to move in a flexible and nimble way in tandem with their changing needs. That’s how we stay relevant and that is the same strategy that we will apply in terms of how we develop our economy, how we grow our economy. It cannot be the same as before, it cannot be business as usual. We are really looking at what we need now, what we need in the future and we start planning now.
iii. Earlier I mentioned that we are also looking at FTAs with other economies, other like-minded partners. One of them that we hope will come into force soon is the European Union – Singapore Free Trade Agreement (EUSFTA). It coming into force soon means that companies in Singapore will soon be able to access the European markets with greater ease. I hope European companies as well will be able to come to Singapore and strengthen their linkages with Singapore and the region.
iv. We are concurrently working to forge new partnerships through new FTAs with countries in Latin America, through the Pacific Alliance and MERCOSUR.
v. Closer to the region, Singapore continues to work with fellow ASEAN members. I am very happy to see a number of our Ambassadors from our ASEAN neighbours who are here with us this morning, and we want to push for greater economic integration in ASEAN and this is done through
• advocating continued integration and trade liberalisation;
• building capacity through technical assistance and infrastructure investment. We set up an office, Infrastructure Asia, to support infrastructure investments and projects in the region, using Singapore as a base.The financing, legal and arbitration services, really trying to support and contribute to infrastructure projects. This is needed to help the region grow and provide opportunities for all; and
• we also want to update our rules for the future economy, especially in the digital domain in areas such as rules on managing data, digital identities etc. We have to be careful that we don’t end up applying yesterday’s rules to solve today’s problems. The digital economy is quite different. There will be a new set of rules and challenges, but I think the same approach of coming together to work out win-win agreements will be important. The same approach of coming together to uphold the rules-based multilateral trading system is important. So whether it is the traditional economy or the digital economy, I think that approach will be needed.
c. In order to support our companies capitalise on potential opportunities arising from the digital economy, Singapore is actively working with like-minded partners to establish new international approaches to foster global digital integration, to create a conducive environment for companies to thrive. Singapore supports the digital economy in three areas:
i. First, through facilitating the global flow of data. Singapore is a co-convenor of the Joint Statement Initiative on E-commerce at the WTO together with Japan and Australia. We are also working closely with Chile and New Zealand on a Digital Economy Partnership Agreement, which is targeted to be concluded by the end of the year. On the ASEAN front, we signed the ASEAN Agreement on Electronic Commerce and developed the ASEAN Framework on Digital Data Governance last year. More recently, the ASEAN Digital Integration Framework Action Plan (2019 – 2025) (DIFAP) was adopted last month by the ASEAN Economic Ministers at the 51st AEM Meeting in Bangkok, Thailand;
ii. Second, through setting standards. Singapore adopted the Pan-European Public Procurement On-Line (PEPPOL) standard, and interoperable standard for e-invoicing, as our nationwide e-invoicing network. Business leaders in the audience would know that today, invoicing and payment is something that consumes quite a bit of cost for companies, especially SMEs, and if we can move this to a platform that is more efficient, it will help to reduce transaction costs; and
iii. Third, to ensure that Singapore-based technology companies can scale quickly, level up their digital capabilities, and expand their global reach to seize the opportunities offered by the digital economy, we have rolled out schemes such the Strategic Partners Programme (SPP). This scheme drives collaboration between our companies and prominent MNCs, to give our companies the opportunity to learn from the very best. This is why I keep emphasising that when we talk about being pro-business, it is not just pro-Singapore businesses. It is pro-Singapore-based businesses, including our international businesses, our MNCs. I think that is the right way for us to grow our economy. If we do it correctly, if we do it well, both foreign and local companies come together to be part of the same ecosystem and they are mutually reinforcing benefits to both. The MNCs need the SMEs, the local companies to have the capability to be suppliers to be able to provide certain technology and services to them. The SMEs in the process of doing that actually benefit, building up their track record, upgrading their capabilities, learning from the best practices offered by the MNCs. If you talk about R&D, new technologies, it is very difficult for an SME to do it alone as they do not have the resources and the scale. That is where this partnership between the smaller local companies and the larger international companies will deepen our expertise and more resources can come together. I reject the approach that some countries have adopted which is to try to protect local companies and reject or turn away foreign companies. In the end, the economy and workers will suffer and in the longer term, the local companies will also suffer. How long can you be protected? Beyond a certain point, the protection will just be an artificial barrier. It is a global economy, customers can find ways around whatever barriers that you put in place. The better approach is to upgrade the capabilities of our companies to make sure that they are globally competitive.
9. I’ve spoken about Trust and Connectivity and now I want to touch on the last but very important area which is Talent. We must continue to facilitate our companies’ access to high quality local and global talent. Similar to the approach I described for companies, we want to welcome international companies, MNCs and at the same time groom our local companies, the same applies for talent. It will be a mistake to adopt a binary approach – all local talent only, reject foreign and global talent, or the other way, which is that we don’t develop our local talent and we only rely on international talent. I think the two extremes must be avoided. What will be good is an optimal balance where we do both. And if we do it well, in the same way as how MNCs and SMEs can mutually complement each other, I believe that when it comes to talent development, the same outcome can be achieved. At the end of the day, what we want is a strong Singapore-based workforce that will give the Singapore economy, Singapore-based companies, the best fighting chance as we compete against other cities around the world.
a. For our technology companies at the forefront of this change, our Tech@SG programme, which will be launched in the fourth quarter of this year, will provide them access to business networks and talent they need to grow in Singapore and expand in the region. We recognise that this is an area where there is a global shortage of talent, so we need to do what we can, to help our companies in this sector attract talent more readily.
10. At the same time, Singapore also maintains our deep commitment to the education and training of our local workforce. This is to ensure that they possess the necessary skills, especially digital skills, to compete at the next platform of global competition. We have done this by partnering the industry. At the Ministry of Education, a lot of the deep expertise and opportunities are actually provided by our industry partners. So our institutes of higher learning, our polytechnics, our ITEs, they work very closely with the industry. The industry provides internship opportunities, it provides research capabilities so we set-up co-innovation labs with them, we setup Earn and Learn programmes, work study programmes with them. All this is for the benefit of our students. We want our students to have the best opportunities and the best opportunities come about when we have strong relationships with the industry.
a. 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 or who want to pick up new skills to do their current jobs better. So artificial intelligence is not a silver bullet that solves all our problems, but it is one important area that we want to develop not just deeper expertise but also more widespread capabilities amongst our workers. So not all of us will be A.I. experts but in the future economy, it is important for all of us to have some understanding of A.I. That is something that will be quite fundamental.
11. To do this, companies also have an important role to play.
a. As business leaders, I hope you will also invest in your own training structures and processes to ensure that your employees have the right skills for the job. Our belief in Singapore is that economic transformation, enterprise transformation must go hand in hand with workforce transformation and skills upgrade. It is not about replacing workers with technology, artificial intelligence or robots, it is about augmenting our workers with new skills, new technologies and new capabilities. I think if we can do this, it will allow us to have a good balance between achieving the best of both worlds. There are certain jobs that technology can help, automation can help, but there are also many other areas such as building relationship and trust with your clients where you still need that human touch. You still need the human being to innovate and come up with new solutions, new products.
b. I was in Japan recently and we visited this company called Omron. Most of us will know Omron for the medical devices that they produce that measure your blood pressure, but that is only less than 15 per cent of their main business. Omron’s main business is to help companies to automate. The founder of Omron, said 60 years ago, “to machines, the work of machines and to humans, the potential for further creation”. I think he is a visionary. 60 years ago, he already saw that the purpose of automation is not to replace human beings but to free them up from the work that they can do, work that is repetitive, that is dangerous and to allow human beings to do things that machines can’t do. Things that require creativity, things that require the human touch. That is what we hope to achieve in Singapore with our SkillsFuture initiative, with our enterprise transformation initiatives, so that the two can go hand in hand;
12. Ladies and gentlemen, allow me to conclude my speech. I covered the global uncertainties, I also covered the potential opportunities in Southeast Asia but the important point that I hope to get across to all of you this morning is that to translate potential to reality is not a given. There is a lot of work that we need to do together to create the environment that is conducive for our businesses to do well. It doesn’t happen automatically. Governments need to put in place pro-business rules, Governments need to invest in the training and skills upgrading of our workers so that we can continue to have the support in society to pursue pro-business policies and if you do it well, it is a virtuous circle because the resources that you generate from growth can allow you to have policies from the social front to re-distribute and re-allocate to help those who have lost out, who need more assistance.
13. I will end with a speech made by our founding leader Goh Keng Swee. In the 1970s, he said this. That some people think mistakenly that economic growth is a bad thing but actually the bigger problem is when you have no growth. When you have no growth or very low growth, what happens is that it becomes a zero sum game. If I want to benefit older workers, it means that it must be at the expense of younger workers. If I want to benefit SMEs, it means that it must be at the expense of the larger companies, if it means that I want to benefit future generations, it must be at the expense of the current generation. When you have zero or very low growth, it is essentially a zero sum game. Dr Goh said that actually, the better strategy is still to pursue growth policies. When you have growth, you have the resources to decide how you want to reallocate, invest in infrastructure, in education in preparing your people for the future. I hope that reminder, that very useful sharing by Dr Goh, is something that we can continue to pursue in this region as there is a tendency to look at growth and some of the social challenges that we face, as though they are mutually exclusive, but actually they go together. And if we do it well, both allow you to have more options to tackle some of the social challenges such as inequality, eradicating poverty, protecting the environment, investing in education and healthcare.
14. Whilst there are headwinds before us, Singapore is confident that if we work together, we can rely on our sound fundamentals and economic strategies to weather through this challenging environment and seize new opportunities.
15. Beyond this summit, we also hope to work together with you to bring about an environment that is pro-business and pro-worker.
16. Thank you very much.