Mr Speaker,

 

Introduction

 

1. Over the last six decades, Singapore has built a strong and dynamic economy, driven by global enterprises, homegrown champions and an ecosystem of SMEs. This has in turn created good jobs, lifted real wages, and raised the standard of living for Singaporeans.

 

2. Our success has been built on solid fundamentals – sustained investments in infrastructure; extensive global connectivity; a skilled workforce; and a pro-business environment.

 

3. Just as importantly, being a small and open economy, we have benefitted from an open, rules-based, multilateral trading system. This has enabled companies here to participate in global supply chains, benefit from global economic growth as well as established Singapore as a hub for goods, services, capital and talent.

 

4. But we are now facing three fundamental challenges –

 

a. In many parts of the world, countries are turning inward, erecting barriers to trade and investment, and prioritising economic security and national interest.

 

b. The rapid acceleration of technological advancements, such as AI, will disrupt industries and jobs.

 

c. Last but not least, our resource constraints – such as land, carbon and manpower – will become increasingly binding.

 

5. However, amidst these challenges and difficulties, there are opportunities and new possibilities.

 

a. Companies around the world are looking to diversify their production bases and supply chains, in response to the evolving global economic landscape. This will create new opportunities for us to capture new investments and enter new markets.

 

b. Our region has strong growth potential – it has a young population; a rising middle class; and good physical and digital connectivity – and is poised to be one of the fastest growing regions in the world.

 

c. Technology, while it may disrupt industries and jobs, can also open up new frontiers for research and innovation, and drive the creation of new products and services, and even new industries.

 

d. Similarly, the low-carbon transition will catalyse the growth of the green economy, such as green manufacturing, clean energy, carbon services and trading, and sustainable finance.

 

6. Five months ago, we had set up the Singapore Economic Resilience Taskforce (SERT) to support firms and workers in navigating the immediate headwinds, as well as to refresh our longer-term economic blueprint so that we can secure our place in the new economic order.

 

Navigating the immediate headwinds

 

7. While there is now greater clarity over the tariff rates that the US has imposed on many of its key trading partners, significant uncertainties remain.

 

a. Negotiations with several countries, including China and India, are still ongoing.

 

b. Details on how the deals will be implemented remain unclear, and in fact, we have already seen a number of conflicting interpretations emerge.

 

c. The US has hinted at further sectoral tariffs, such as on semiconductors and pharmaceuticals, and these are imminent.

 

8. I just want to take this opportunity to clarify that these two sectors contribute about 7 per cent of our GDP, not 40 per cent as Mr Pritam Singh  pointed out. But even at 7 per cent, it is significant.

 

9. The full effects of these tariffs will take time to flow through in the months and years ahead.

 

10. The SERT will continue to monitor the developments and assess the impact of the tariffs on our businesses and workers.

 

a. Our current support measures, including those announced at this year’s Budget and Committee of Supply, are still relevant and helpful.

 

i. These include extensions and enhancements to the Double Tax Deduction for Internationalisation, the Market Readiness Assistance grant, as well as the Enterprise Financing Scheme.

 

b. We have also announced that we will roll out the Business Adaptation Grant from next month to help companies impacted by the tariffs to adapt their business operations and strengthen their supply chain resilience.

 

c. We will also support our workers. To help our jobseekers better identify suitable job opportunities, we have stepped up our career advisory and guidance services, including through NTUC’s e2i.

 

d. We will roll out the Graduate Industry Traineeships programme from next month to help fresh graduates gain industry experience and skills, which will facilitate their transition into full-time employment.

 

e. We are prepared to do more for our companies and our workers if necessary.

 

11. The global developments we have seen over the past few months are not a passing storm; instead, they point towards a changed world – a new norm that is more fragmented, with sharper competition for investments, and a shift towards economic security and national interest. These call for a new economic blueprint to steer Singapore forward in this changed world.

 

12. And that is why we embarked on the Economic Strategy Review (ESR). The ESR is consulting and engaging stakeholders, and will submit its recommendations next year.

 

Refreshing our economic blueprint for a changed world

 

13. I would not want to pre-empt their conclusions at this point, but let me talk broadly about our approach.

 

14. First, we must strengthen our positioning in existing growth sectors, and establish a strong foothold in new areas of growth, as pointed out by Mr Sharael Taha.

 

a. One existing growth area is Advanced Manufacturing. Over the decades, we have established Singapore as a global node in key sectors such as semiconductors, healthcare, specialty chemicals and aerospace.

 

i. I attended the opening of ST Engineering’s new engine MRO facility last week.

 

ii. In addition to ST Engineering, we are also a key aerospace manufacturing and MRO site for leading firms such as SIA Engineering, GE Aerospace, Rolls Royce and Collins Aerospace.

 

iii. Singapore accounts for 10% of the global output for maintenance, repair, and overhaul (MRO) market, and close to 20% of the global market share in engine MRO.

 

iv. We are supporting companies to build new repair and process development capabilities, deploy robotics and automation solutions, and conduct R&D in AI, additive repairs and electrification technologies.

 

v. These moves will strengthen Singapore’s positioning as Asia’s leading aerospace hub and a critical node in global supply chains.

 

  b. We have also established our position as a leading services hub, such as in commodity trading, digital industries, tourism, financial services and professional services. We will build on this foundation to further reinforce Singapore’s status as a services hub for the region, especially with the fast-growing digital economy.

 

c. We must also position ourselves well to establish a strong, early foothold in new growth sectors.

 

i. One such area is in precision medicine, which is projected to grow at an average of 11% annually, to reach a size of US$300 billion globally by 2035.

 

ii. Our strengths as a leading biomedical sciences hub put us in a good position to capture opportunities in the research, development and commercialisation of life science tools, diagnostic testing and therapeutics in this rapidly growing sector.

 

iii. In addition to precision medicine, we are also exploring other potential growth areas such as AI and deep tech, green economy, Autonomous Vehicles and space.

 

15. Second, we will make Singapore a home for leading firms. We will reinforce the presence of today’s industry leaders, and nurture companies with the potential to become future industry leaders.

 

a. We have established a strong base of industry leaders in key sectors. We will work with them to further grow their businesses and anchor new, high value-added activities here in Singapore.

 

i. For example, in the healthcare sector, 8 out of the top 10 biopharmaceutical companies have established their manufacturing sites or R&D activities here.

 

ii. Seven of 10 top Life Science Tools companies have significant R&D and manufacturing activities . This has enabled us to be among the top global manufacturing sites for high-value manufacturing instruments and consumables.

 

iii. We will partner these industry leaders to establish best-in-class manufacturing facilities, R&D activities, develop new capabilities such as AI, and expand their product range.

 

b. Many Singapore enterprises are also industry leaders in their respective sectors, and we will support them to deepen their capabilities and help them to expand overseas.

 

i. One example is Sembcorp – to date, the company has established a total capacity in renewable energy generation of close to 18 GW overseas, in countries such as China, India and Vietnam.

 

ii. This is an example of how our Singapore companies are tapping into growth opportunities overseas.

 

iii. By growing in overseas markets, these companies will become bigger and stronger to support the value creation, innovation, and HQ functions here in Singapore. This will also reinforce our status as a hub for globally competitive firms.

 

c. There are companies which may be small today, but have the potential to become future industry leaders. We will seek to anchor them in Singapore, so that they may be new engines of growth for our economy in time to come.

 

i. One such category of companies are startups.

 

ii. Ambiq Micro is a good example.

 

1. Ambiq manufactures ultra-low power processors that consume one-tenth of power compared to their competitors. Their technology can be found in smart watches and was used to power the TraceTogether token during COVID-19.

 

2. Ambiq’s first established their presence in Singapore in 2021 and have since grown and successfully listed.

 

3. To support their international growth, the company has established their regional headquarters and R&D activities here, and we hope to further anchor their presence in Singapore.

 

iii. At the same time, we will study how we can better support our local startups and entrepreneurs from initial stages to scale-up and grow. This could include access to growth capital, space and infrastructure needs, and partnerships in overseas markets.

 

  1. One example is Aliena.

 

2. Aliena is a space-tech start-up that develops electric propulsion engines which enable small satellites to fly closer to Earth for higher quality data collection.

 

3. With support from EnterpriseSG’s Global Innovation Alliance (GIA), Aliena worked with partners in the UK to develop a technology that uses water electrolysis for electric propulsion systems.

 

4. These collaborations enabled Aliena to expand its customer base and operationalise their footprint, and the company has seen a more than 300% year-on-year increase in revenue last year.

 

16. Third, we will strengthen our fundamentals to stay competitive. Let me highlight three key fundamentals.

 

a. One, our capacity to deploy and diffuse new technologies.

 

i. Each new wave of technology – from computerisation, the Internet, and now to AI – has shown that it is not just the technological breakthroughs themselves, but the ability and speed at which we can deploy and diffuse them effectively across the economy that determines whether we can sustain our competitiveness.

 

ii. We must therefore be a nation of both innovators and fast adopters. Take AI for example –

 

1. We have made good progress in accelerating AI-driven innovation through the establishment of AI Centres of Excellence.

 

2. At the same time, we must complement this by broadening and deepening AI adoption across the broad base of enterprises, including SMEs. We will develop AI playbooks and toolkits to guide companies in adopting AI-driven solutions, as well as raise the AI fluency among both tech professionals and non-tech professionals.

 

b. Two, our skilled workforce.

 

i. The quality of our human capital has been a key competitive advantage for Singapore.

 

  ii. As we transform our economy towards higher value-added activities, we must also ensure that our upskilling and reskilling efforts keep pace.

 

iii. We must empower workers with new skills for the future, including being AI-fluent, so as to remain relevant.

 

iv. Similarly, we want our workers to gain overseas work experience and exposure. This will position them well to take on regional and global leadership roles in future.

 

v. We must also stay open to global talent, so that we may tap on their strengths to complement our resident workforce. This is critical to ensure that our industries and firms stay globally competitive.

 

c. Three, careful and long-term planning.

 

i. Our years of investments in our port and airport infrastructure have been critical to Singapore’s excellent connectivity today, which underpins our role as a regional hub.

 

  ii. Similarly, we must plan for the energy transition and help our businesses transition to a sustainable future. This is why we are pursuing multiple pathways to decarbonise our energy mix. We are ramping up our domestic solar deployment, facilitating low-carbon electricity imports, and building capabilities in emerging low-carbon alternatives such as hydrogen and nuclear energy.

 

iii. We will calibrate the pace of the transition carefully. Even as we decarbonise, we must ensure that Singapore stays cost-competitive and our energy security is safeguarded.

 

17. Even as we secure our longer-term growth, we have not lost sight of the challenges that some of our SMEs are facing, including those in the retail and F&B sectors, as well as our heartland enterprises.

 

a. This is because of a variety of factors, including more intense competition from e-commerce players, shifts in consumer preferences, and rising costs.

 

b. We have rolled out several initiatives to support such businesses.

 

i. For example, those in F&B can tap on EnterpriseSG’s FoodX programme, and heartland enterprises can tap on the Enhanced Visual Merchandising Programme and the Heartland Enterprise Placemaking Grant to revamp their storefront to drive more business.

 

ii. Our CDC and SG60 vouchers will also encourage consumers to spend in the heartland enterprises.

 

c. We will help these SMEs raise their productivity, restructure their operations and rejuvenate their businesses.

 

18. I mentioned earlier that despite the challenges ahead, there are opportunities for Singapore to grow our economy.

 

a. We expect to grow at about 2 – 3% per annum over the next decade on average.

 

i. This is comparable to many other small, advanced economies such as New Zealand, Sweden and Switzerland.

 

b. But we should not take that as a given. Instead, we should aim higher, take advantage of the window of opportunities over the next few years to achieve a faster rate of growth if we can, before we settle down to 2 – 3% trend in the long term.

 

c. But this will not be easy.

 

i. Our foreign worker policy has remained unchanged. We expect our workforce to grow just about 1% per annum over the next decade, given our ageing workforce and falling birthrates.

 

ii. We also expect our productivity to grow by about 1 - 2% per annum over the next decade. This is already challenging, judging by the historical experience of economies with similar size and level of development.

 

iii. There will also be times when the global economy slows down and our growth will also slow down consequently. And therefore, that will bring us to 2 to 3% per annum.

 

d. However, we see opportunities to get a larger productivity uplift from technology, such as AI, robotics as well as automation.

 

e. We will also grow other higher value-added industries as I’ve outlined before.

 

f. If we do it right, we may be able to add 1% and achieve 3 – 4% growth, instead of 2 – 3%, and in very good years, maybe even more.

 

Strengthening our regional and global trade connectivity

 

19. I spoke earlier about how Singapore’s success has been closely intertwined with an open, rules-based, multilateral trading system. Trade is important. Trade is three times our GDP.

 

a. Singapore pursues an active trade strategy through our Free Trade Agreements (FTAs) and other platforms.

 

b. These FTAs have opened doors for our companies to access new markets, diversify supply chains, and build deeper economic partnerships around the world.

 

c. Our network of FTAs also makes us an attractive destination for foreign investments, and has enabled us to build a resilient economy that provides for good jobs for our people.

 

20. We must double down on our efforts to preserve and expand our international economic space.

 

21. Bilaterally, we will deepen cooperation and integration with our key economic partners.

 

a. Both the US and China remain our key economic partners – the US is our largest foreign investor; and China is our largest goods trading partner. While competition between the US and China has intensified, we must continue to work with both the US and China in areas of mutual interest and mutual benefit.

 

b. India is another economy that is poised to grow strongly in the years ahead. Earlier this month, we launched the Roadmap for the Comprehensive Strategic Partnership between India and Singapore, outlining areas such as semiconductors, industrial parks and capital market connectivity where both countries could strengthen economic cooperation.

 

c. Beyond India, we are also deepening our economic cooperation with other key economies, such as Australia, the EU, Japan, Korea, New Zealand, Saudi Arabia and the UAE. And the list goes on.

 

d. Closer to home, we are also deepening our economic cooperation with our immediate neighbours, including in Johor through the Johor-Singapore Special Economic Zone. And in Batam-Bintan-Karimun (BBK), we are further exploring how the three of us can work together for even stronger synergies.

 

22. Regionally, we are working within ASEAN to deepen our regional integration, as well as to broaden our cooperation with other external partners.

 

a. We have recently concluded the negotiations to upgrade the ASEAN Trade in Goods Agreement; and we are making good progress towards substantial conclusion on the ASEAN Digital Economy Framework Agreement later this year.

 

b. ASEAN is working with the Gulf Cooperation Council (GCC) to enhance trade and investment flows.

 

c. We are also working to establish a dialogue with the EU, and with the CPTPP.

 

23. And last week, Singapore, together with 13 other small, medium and trade-dependent economies, launched the Future of Investments and Trade Partnership.

 

a. The FIT Partnership is an informal group that will champion a forward-looking trade agenda, and work together on areas such as supply chain resilience, investment facilitation, non-tariff barriers and trade facilitation, as well as leveraging on technology.

 

24. These examples illustrate how Singapore will broaden its network of economic partnerships, including in areas such as the digital economy and the green economy. By doing so, we will open up more opportunities for our businesses, diversify our markets, and strengthen our resilience in an increasingly fragmented world.

 

25. Last but not least, we will need to strengthen the rules-based trading system.

 

a. The WTO is not perfect, but remains an important foundation on which to build a better global, rules-based trade architecture.

 

b. For sure, the WTO needs to be reformed to stay relevant and effective. We will work with like-minded partners to reform and modernise the WTO, and reinforce an open, fair, rules-based multilateral trading system, so that small, trade-dependent economies like Singapore can continue to thrive in the global economy.

 

Conclusion

 

26. Mr Speaker, Singapore’s economic journey has never been an easy one. With limited land, manpower and natural resources, we have had to work harder, plan further ahead and move faster than others. We can take heart at the success we have achieved over the past six decades, but we cannot afford to be complacent.

 

27. To secure our future in a changed world, we must stay globally competitive, by building strong industries, anchoring leading firms here, grow our enterprises, strengthening our capacity to embrace technology, investing in our workforce and finding ways to overcome our resource constraints.

 

28. We must also continue to expand our international economic space, by strengthening our networks of trade and investment, reinforcing a rules-based global trading system, and positioning Singapore as a trusted hub in a more uncertain and turbulent world.

 

29. Our circumstances may be challenging, but our foundations are strong. Together with determination and imagination, we can continue to grow our economy, create good opportunities for our people, and build a better and brighter future for Singapore and Singaporeans.

 

30. Thank you.