1. Thank you for inviting me to join you this evening to commemorate EDB Society’s 30th Anniversary.
2. Since its founding, EDB has been a key driver of Singapore’s economic growth and development.
- Even amidst the COVID-19 pandemic, EDB managed to secure more than S$13 billion of fixed asset investment commitments in the first four months of 2020.
3. If I may suggest, EDB’s and Singapore’s success have been premised on three sets of ethos:
- First, a cleared-eye assessment of the wider global trends impacting us;
- Second, the ability to make hard-nosed decisions on what is necessary, and to adapt to evolving situations, and
- Third, a dogged determination to pursue our objectives once we have decided on ourdirection.
4. We have never tried to develop a perfect plan, for there isn’t one.
- Instead, while we have broad strategies to guide us, we have sought to be agile, adapting and adjusting along the way to perfect our execution.
- We don’t fall in love with our plans.
- Instead, we constantly challenge our assumptions and have a bias for concrete actions that deliver results for Singapore.
5. I would like to thank the generations of EDB officers who have established this ethos and the right work ethics for EDB and Singapore.
- EDB’s brand name of efficiency and dependability is hard-fought.
- We will reinforce and grow it through successive generations.
6. Tonight, to kickstart our discussion, I will posit three hypotheses to get us thinking on the way forward for Singapore.
- First, global supply chains are being rapidly reorganised and reordered for reasons of technology, geopolitics, efficiency, resilience and the relative economic development of key economies.
- Second, the dispersions of growth across countries, corporate earnings across and within industries, and consequently wages within economies, will most likely continue to widen.
- Third, the resultant social and political tensions within and between economies will compound the challenges of coherent and collective global leadership.
- We therefore cannot assume that there will be a global security order, integrated global production systems, or rules-based trading order, underpinned by global cooperation or underwritten by major powers.
7. Let me elaborate.
8. First, on shifts in global supply chains:
9. COVID-19 has reinforced and accelerated existing shifts in the global production and supply chains that were already taking place, driven very much by technological developments.
- As massive leaps in computing power enabled artificial intelligence, as well as large-scale data collection and processing, there has been a rapid development of new products and services for new market segments.
- Together with additive manufacturing, advanced manufacturing has fundamentally changed.
- Computing power has enabled rapid generational cycles for product design and production systems, which have overtaken traditional manufacturing in terms of cost, time savings, speed to market and efficiency.
- Even medicine and biopharma products have been impacted. The amazing speed of development of the COVID-19 vaccines is but one example.
10. Next, prior to Covid, companies around the world were already rethinking the organisation of their global production systems and supply chains to insulate themselves from the vagaries of geopolitics.
- While resilience to us as a consumer means not to be held ransom to a single source or market; resilience to us as a producer means not to be easily bypassed or displaced by others.
- When EDB and Singapore attract investments, beyond creating jobs and earning money, we must also aim to be at the critical nodes of global value chains.
- Countries no longer just seek to diversify from China alone to “China plus one”. They want to ensure that they are never dependent on any one country.
- It is not just about “China plus one” or “India plus one”. It is actually about “Anything but one”.
11. The absolute and relative progress of development in different economies will also continue to reshape global production, supply chains and consumption patterns.
- It is too simplistic, and even dangerous, to categorise Western advanced economies as producing high-value products and services, while Asian economies are producing lower-value manufacturing products.
- More importantly it is about who can control the critical parts of the global production and distribution, so as to not be easily displaced. To this end, we should carefully examine the new emerging global value chains to better understand where we stand vis-à-vis other countries.
- We need a more in-depth analysis on where to position ourselves, especially in the emerging sectors ranging from fintech, agri-tech and others.
- The capabilities of many Asian and Western economies have changed profoundly in recent years and will continue to change
- Global demographics and skills of the different populations are also changing relative to one another. All these will change the pattern of consumption and production, where people site their production and how they organise their supply chains.
12. All these forces portend both challenges and opportunities for Singapore.
- While the availability of land, natural resources and people still matter, what will matter even more in the future would be the ability to:
- create trusted environments and systems to attract capital and talent;
- generate and protect intellectual capital; and
- provide a safe harbour amidst a fragmenting or bifurcating world.
13. Therein lies Singapore’s opportunities.
14. Second, widening disparity between and within countries
15. A consequence of the first set of issues to do with shifting global supply chains is a greater likelihood of the dispersion of growth, corporate earnings and wages in different economies.
- Economies which can successfully help their companies and workers master the new technological trends and global shifts will pull ahead from the other economies.
- Economies that remain connected and leverage each other’s comparative advantages, will also better distinguish themselves.
- From an economic perspective, the ability to optimise at the regional and global level will always beat the local and individual optimal.
- This is why Singapore’s network of Free Trade Agreements and Digital Economy Agreements will help us to transcend our size and physical constraints.
- Likewise, companies who can master global trends and shifts will dominate the market.
- We can expect to see market consolidation in key industries that leverage data and computing power, such as infocommunication and media, advanced manufacturing, and the biomedical sector.
- Finally, workers with the right skills, in the right companies and the right industries will see their wages pull apart from the rest.
16. According to a recent UN report , the absolute gap between the average incomes in high and low-income countries has doubled since 1990. Income disparity within countries is also growing, with more than 70% of the global population living in countries where the wealth gap is growing.
17. As many governments have turned to fiscal policies to mitigate the economic fallout of COVID-19, this has also narrowed their fiscal options and may constrain their ability to address the more fundamental domestic economic disparity within their respective countries.
- If left unchecked, there may be greater resistance to trade and integration if segments of the population do not see the benefits of globalisation and trade.
- Governments may also lose the courage or the political space to stand up on the international stage to continue to support globalisation and integration.
18. Singapore is not immune from such disparities and forces. However, what makes us different is our determination to help our people understand these challenges and put in place solutions to narrow the disparities.
19. We need to remain committed to connectivity and deepen regional integration and global interdependence.
- Despite cross-border restrictions due to COVID-19, trade and financial connectivity have kept up business activities, contributing to the survival of many businesses and livelihoods of our people.
- We will continue to develop modern connectivity in trade, finance and digital domains. This will help countries to leverage on each others’ respective comparative advantages, so that neither COVID-19 nor geopolitical tensions may divide us.
20. Domestically, we need to muster the political will and resources to facilitate the distribution of the fruits of trade and help our businesses and people to adjust to new realities and embrace new opportunities.
- Governments, and those who have benefited from globalisation, have a responsibility to help those adversely impacted by globalisation. Without strong and coherent governance in tackling inequalities, countries will be faced with the threat of social fragmentation.
- This is why the Singapore government has doubled down on support for our companies to help strengthen their competitiveness, and create better job opportunities for all Singaporeans.
- From the Scale-up SG programme for promising high growth SMEs, to the suite of support for micro enterprises, we are providing support to companies of different sizes and at different stages of growth, so that everyone can partake in the economic growth story of Singapore
21. In the tyranny of populist politics against sound economics, we must lay the foundation of trust to provide governments with the political space that they need to continue promulgating a rules-based global order and connectivity. This will serve the long-term well-being of our people, the region and the world.
22. Third, global leadership and global governance systems.
23. In light of technological disruptions and domestic constraints, economies under pressure will likely resist further integration. Major powers such as the US, China and the EU, all have their fair share of domestic challenges, and can expectedly be more circumspect in shouldering global responsibilities for greater integration.
- An international rules-based trading system has created a stable trading environment for all, bringing growth, stability and peace to many countries over the years.
- Nonetheless, the multilateral WTO trading system is under stress. Since December 2019, the WTO’s Appellate Body has been non-functional. Without a binding and neutral mechanism to resolve trade disputes, the risk of a fractured trading system will only grow.
24. As leadership in the world’s two largest economies of US and China deal with domestic preoccupations such as COVID-19 and their domestic economic recovery, they may have limited bandwidth for a more international agenda.
25. Therefore, other countries around the world will need to step up to the plate to reinforce the rules-based system by which the world operates.
- While the US and China constitute a quarter to a third of global GDP, depending on computing method you use, the rest of the three quarters to two thirds of the world must also step up to the plate.
- The responsibility to uphold and update the global trading system cannot be the sole prerogative and responsibility of the two major powers alone.
26. Given the severe consequences of a retreat from multilateralism, Singapore cannot afford to be a passive participant.
- We must work with like-minded partners to stand as an integrative force, deepening country-to-country linkages, and set high-standard global rules with partners to enable businesses to thrive.
27. We may also do so through regional groupings.
- For example, in a time where support for multilateralism is fraying, the recently concluded RCEP which is the world’s largest FTA, is a clear signal of the region’s unwavering support and commitment to the global multilateral trading system.
- It has placed the region at the forefront of economic recovery, and will help the region remain an attractive and integrated investment destination amidst COVID and post-COVID.
- Together with the CPTPP, this will form mutually reinforcing pathways for a free trade area in the Asia Pacific.
28. Beyond traditional FTAs, we are also forging connectivity and new trade rules in forward-looking areas such as data, finance and technology.
- We have concluded digital economy agreements with Australia, and separately with Chile and New Zealand. We have also launched negotiations with Korea, and announced plans to launch negotiations with the UK soon.
- Through these DEAs, Singapore hopes to build on our extensive network of FTAs and other digital cooperation initiatives to foster interoperability of standards and systems.
29. Singapore will also continue to engage the US and China to deepen our bilateral cooperation and to keep them invested in the region.
- Earlier this month, Singapore announced an MOU with the US to extend trade financing and investment support to our companies. This will help to facilitate continued investments from the US, which is Singapore’s largest foreign direct investor by investment stock.
- Singapore also recently signed a landmark number of 10 agreements with China at the 16th Joint Council for Bilateral Cooperation to deepen cooperation in a variety of areas ranging from public health to trade.
30. Where do we go from here?
31. Being clear-eyed about our challenges and opportunities is the first step.
- Taking hardnosed decisions to overcome the challenges is the next complementary step.
32. To this end, there are many things that we need to do right. For tonight’s purpose, I will focus on the two most critical tasks:
33. The first task is rallying our people into taking action by being upfront about the challenges and continously guarding against complacency.
- In the immediate term, our priorities are to keep Singapore’s COVID situation under control, resume our economic activities in a sustainable way and start building our new economy now.
- We are now in a comfortable position relative to many places in the world. But we have learnt that things can go wrong very quickly if we are careless. And it will cost us a lot of time, energy and opportunities to get ourselves out of the hole again.
- In the medium term, we must assume that we can be easily overtaken by others who are hungrier and who can leapfrog us in technological areas where they are not encumbered by the old installed base.
- This has already happened to some areas in ICT, finance and advanced manufacturing. We should not delude ourselves that we will always stay ahead effortlessly as if the competition is static. Instead, we must and can always be better.
- Our economic recovery is one good example. Notwithstanding our current position, we will not and cannot be complacent. We will not just play defensive to try to get back to where we were. Instead, we are constantly challenging ourselves to come up with new ideas and value propositions to capture new markets ahead of others amidst the pandemic.
- In the longer term, we must develop a nation of people and businesses who are not afraid of global competition but seek to thrive in it.
- We will spare no efforts to educate and train our people, and enable our businesses to thrive amidst global competition instead of shielding ourselves from it.
34. The second task at hand would be to manage the challenge of earning dispersions.
- We must take tangible and sustained actions to level up our people and companies for the long term, rather than just resorting to populist actions like elsewhere to either shut out foreign competition or conduct unsustainable redistribution of a shrinking pie.
- The issue of wage disparity should be tackled head on by equipping our people with the skills for tomorrow.
- This must be a lifelong pursuit. Compulsory education of the early years must now evolve to continuing education for life.
- These concerns of ours is sharpest for our middle-age PMET workers in their 40/50s and who left school 20/30 years ago.
- We will spare no effort to upgrade them to keep their skills current and relevant for the future.
- Beyond ensuring fair competition locally, we must also enable our people to compete internationally.
- The real competition is not amongst the local and foreign workers or companies here.
- The real competition for our 5 million people is with the 7 billion people outside Singapore.
- We understand that some may still not be able to keep pace with the global competition despite trying their best.
- This is where we must have a collective social conscience where those individuals and companies who have succeeded, must have a sense of responsibility to help those who have not.
- Singapore must, and will then, be a city-state of opportunities, regardless of one’s race, language, religion or ancestry; bonded by a common set of values, namely meritocracy, multiracialism and incorruptibility.
- This is also how Singapore distinguishes ourselves amongst nations in times of rapid changes.
- Continuously building a fair and just society with opportunities for all.
- Continuously mobilising the resources to take care of everyone, especially the weaker and more vulnerable ones among us – from housing to healthcare to lifelong training, so that we can all progress as a nation to enjoy the fruits of growth.
35. While COVID-19 may be the crisis of a century, I am confident that Singapore is well-placed to emerge stronger from this crisis. Not only that, if we do things right, we can also turn this into a opportunity of a generation for us to pull apart from the competition and distinguish ourselves as a nation that takes care of each other through thick and thin.
36. With that, I would like to once again, thank generations of EDB officers, who have played a part in our Singapore story. Your clear-eyed analysis, hard-nosed decisions and your dogged determination to pursue what we believe in has helped Singapore to be where we are today. We will build on that foundation and emerge stronger.
37. I look forward to our dialogue, and hope to hear from you on your views in these areas. Thank you.