Keynote Address By Mr S Iswaran At The Business Times Leaders’ Forum 2016: Singapore’s Future Economy

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KEYNOTE ADDRESS BY MR S ISWARAN, MINISTER FOR TRADE AND INDUSTRY (INDUSTRY) AND CO-CHAIR OF THE COMMITTEE ON THE FUTURE ECONOMY, AT THE BUSINESS TIMES LEADERS’ FORUM 2016: SINGAPORE’S FUTURE ECONOMY ON TUESDAY, 31 MAY, AT 9.25AM.

The Future Economy – What it really takes

His Excellency Mr Scott Wightman,
the British High Commissioner to Singapore,

Her Excellency Ms Hazel Francis Ngubeni,
the High Commissioner of the Republic of South Africa in Singapore, 

Mr Alan Chan, CEO, Singapore Press Holdings,

Ms Judy Hsu, CEO, Singapore, Standard Chartered Bank,

Mr Alvin Tay, Editor, The Business Times,

Distinguished Guests,

Ladies and Gentlemen,

1.            Good morning. I am very pleased to join you this morning at the Business Times Leaders’ Forum.  I congratulate The Business Times and Standard Chartered Bank on this inaugural forum that brings together distinguished leaders from business, media and government to consider issues and imperatives relevant to our economy. It is a timely and important initiative given the impact that unfolding trends will have on our people, our businesses, and our future economy.

Significance of the CFE

2.            The Committee on the Future Economy (CFE) has been established at a time when we stand at the crossroads.  Domestically, our land and labour constraints are biting harder due to demographic trends and competing needs.

3.            Regionally, the prospect of opportunities associated with the rise of Asia is coupled with the challenge of increasing competition from neighbouring economies. Globally, the economic outlook remains uncertain, and we are witnessing slower and more volatile economic growth around the world.

4.            New challenges are also emerging. Global value chains across many industries are being reconfigured by new trends. Rising labour costs in emerging economies, China’s in-sourcing of intermediate goods and services, and similar re-shoring trends in the US, will have a major impact on distributed manufacturing networks and cross-border supply chains.

5.            And, we anticipate significant disruptions to businesses and jobs. The World Economic Forum estimates that 7.1m jobs will be lost by 2020, through the combined effect of demographic changes and technological advancement. White collar jobs are no less vulnerable to this threat; in fact, they account for the majority of such jobs at risk. The redeeming feature is that these changes are also creating new jobs in areas like data analytics and cyber security that need different higher order skills.

6.            The upshot is that we are in a period of transition for economies, industries and jobs. Industrial activity, business models and jobs will be reshaped, redefined or even completely displaced. The change, whether evolutionary or revolutionary, causes uncertainty and compels difficult choices. Our best response to this uncertainty is to be prepared and adaptable in the face of these new economic realities.

7.            In Singapore, we are fortunate to be building from a position of strength predicated on sound fundamentals. We are well-regarded for our good and stable system of governance, and strong institutions. We continue to invest in R&D, infrastructure and a skilled workforce. Our unique tripartite model has anchored stable labour relations, and engendered deep partnerships between Government, businesses and workers that are unique to Singapore.

8.            Collectively, these factors have made us an attractive place to do business. And, it is essential that even through this period of significant change Singapore remains a place where enterprises thrive, opportunities are created, and talent can flourish. 

9.            That in essence is the remit of the Committee on the Future Economy. It will consider the challenges and opportunities that lie ahead for Singapore, and make recommendations for how we may respond to a rapidly changing environment, and seize opportunities for our economy and our people.

10.         From the very outset, Minister Heng Swee Keat and I discussed the importance of the CFE being a broad-based national effort. Given the scale and complexity of the challenges, we wanted to canvass widely for views and ideas. Also, we wanted to build a consensus around our path forward, as ultimately it will involve all stakeholders in our economy.

11.         Hence, in forming the Committee, we have brought together many business leaders with expertise and experience in organisations of different sizes and industries, in Singapore and abroad. Together with leaders from the labour movement, people sector and academia, the CFE embodies a diverse range of experience and perspectives, and this has been invaluable in our discussions. Beyond the main Committee and Sub-Committees, we have also engaged more than 2,000 stakeholders through close to 60 face-to-face sessions since January. Through more than 10 deep dives and thematic discussions, we have sought the perspectives of many experts from the corporate world.

Towards an innovation-led economy

12.         A consistent and recurrent theme across all our conversations, has been the importance of Innovation – How innovation can sustain Singapore's competitiveness and future economic growth; the importance of an environment conducive to innovation, enterprise and collaboration; and the need to nurture essential attributes in our people and enterprise eco-system for pervasive innovation.

13.         Indeed, it is not surprising that Innovation has emerged as such a strong theme.

14.          The digital age and technologies like artificial intelligence, advanced manufacturing, and collaborative connected platforms are driving disruptive forces globally.  They are shaking up industries and sectors, and transforming jobs. At the recent May Day Rally, PM Lee spoke about the impact of companies like Taobao, Uber, and AirBnb – all leaders in their own right, but bearing little resemblance to the incumbents in the fields they are disrupting. 

15.         On the other hand, there is a growing need for innovative solutions – driven by demographic and healthcare trends; climate change and energy needs; restructuring industries and value chains; and rapid urbanisation and a rising middle class in Asia.

16.         It is therefore imperative for Singapore to build an innovation-led economy.  Singapore must become a vibrant base for innovative, entrepreneurial companies across the entire corporate landscape – start-ups, SMEs, LLEs and MNCs. A place where new products and services are created to meet the fast changing needs of the regional and global market. In essence, we have to move beyond value-adding to become an innovation-led, value-creating economy to compete globally. 

17.         The CFE is deliberating and consulting widely on what we need to do to achieve this. For now, let me share three reasons why I think Singapore can successfully navigate this paradigm shift.

Strengthening Our Trusted Hub Status

18.         First, we are a well-connected, trusted, regional and global hub. This has allowed us to anchor physical and financial flows in and through Singapore. We have become a gateway for companies seeking to internationalise. And, as developments in the global economy increasingly move into the realm of data and ideas, Singapore’s reputation as a networked and trusted hub puts us in good stead to host these new activities and flows.

19.         To become the premier trusted hub for the digital age, we will have to do more. The CFE is studying how we may strengthen our digital connectivity, and better leverage digital infrastructure to facilitate cross-border trade, investment and data/information flows. We are also considering measures to strengthen our capabilities in related fields such as cyber-security, which will reinforce our attractiveness as a digital hub, and has the potential to become a growth industry in its own right.

20.         We are also exploring how to strengthen Singapore’s position as a hub for intellectual property and related activity. Last year, Singapore became ASEAN’s first International Patent Search and Examination Authority under the Patent Co-operation Treaty. Not only will this encourage companies from around the region to take advantage of our Intellectual Property (IP) industry, it will also help to anchor more R&D and innovation activity in Singapore.

Building Eco-systems for Innovation

21.         Second, we have an eco-system that supports the development of enterprise capabilities as well as Research & Development. Earlier this year, PM Lee unveiled a $19 billion plan under RIE2020 to support and translate research into solutions that address national challenges, build up innovation and technology adoption in companies, and drive economic growth through value creation. A robust IP protection system will also bolster our capacity to innovate and create new solutions that have the potential to go global.

22.         One area that needs more work is in fostering more opportunities for collaborative innovation. Within the private sector, we want more companies operating within the same verticals – from start-ups and SMEs, to MNCs and LLEs – to come together to share ideas and perspectives, and collaborate on solutions to common challenges. We also want greater public-private cooperation, which can tap on expertise in our research institutions to bring new inventions and processes to market.

23.         One model is the Advanced Remanufacturing and Technology Centre, a collaboration between A*STAR, NTU and industry partners representing both global and local players, including SMEs, in aerospace, oil and gas, marine, energy and engineering.  Since the programme began in 2012, it has helped to develop over 50 industry projects, including techniques that are being used here for aircraft engine overhaul and repair. These models, where supplier SMEs have deep capabilities and work closely with MNC/LLE partners, help us to compete better as industry clusters.

Nurturing a More Innovative Workforce

24.         Third, we have a strong workforce with a judicious blend of local and global talent. An innovation-led economy will require a talented, well-trained workforce with both deep technical expertise and soft-skills. It will also require a workforce with a forward looking and adaptable mind-set that embraces continuous learning and change. We will also need employers that recognise and appreciate these skills and qualities. These are issues already being looked into under the SkillsFuture initiative, and the CFE will develop them further.

25.         An innovation-led economy of the future also requires a greater flexibility in the workplace, and in the way work is organised. The “gig economy” of freelancers contracting services directly with employers may expand to encompass higher value work. While this could help companies of the future flexibly tap on talent and skills while remaining lean, we also need to consider how to sustain these “gig workers” through regulatory protection and other social support.

A Case Study for our Future Economy – Tapping the Potential of E-Commerce

26.         One example of a sector that has up-ended traditional business models, but at the same time presents new opportunities, is e-commerce.  E-commerce has had an indelible impact on brick-and-mortar retailers and traditional service providers. A 2014 survey by Nielsen found that around 70% of Singaporean consumers have purchased air tickets and made hotel reservations online. Over half have purchased clothing on online platforms. These days, you can even get durians online!

27.         While this presents a challenge to traditional businesses models, it is also a trend that offers great opportunity.  Just last week, Temasek and Google released a report estimating that the e-commerce market in Singapore is expected to be worth almost $7.5bn by 2025, a five-fold increase from the around $1.4bn recorded last year. Taking into account online media and other e-services such as ride-hailing, the ASEAN market will present a $200bn per year opportunity in just under a decade.

28.         Singapore has the potential to become the centre of e-commerce activities in ASEAN. We are home to some of the most successful e-commerce start-ups in the region with familiar names like Lazada, Garena and GrabTaxi.  We serve as a regional base for other global players like Taobao.

29.         Already, our capabilities as a logistics and financial hub make us an attractive location for e-commerce players to establish operations. We need to reinforce our value proposition for digital businesses by strengthening our capabilities in digital connectivity, cyber-security, and data analytics.

30.         Beyond physical goods, we have the potential to become a hub for digital goods and services too, where new solutions will be needed, for example in the area of e-payments. By some estimates, 60-70% of citizens in Indonesia, Philippines and Vietnam are still “unbanked”. This presents an immense opportunity for companies who can develop solutions to the challenges inherent to the transaction of virtual goods, where “cash-on-delivery” is not an option.

31.         All this will require a new breed of talent. Whereas in the past we had marketers to create displays for brick-and-mortar stores, we now need more knowledge workers who are digital natives, with an intuitive and nuanced grasp of digital marketing. As our start-ups in the e-commerce space take the next step towards internationalisation, they will also need talent who are familiar with regional markets and their varied preferences.  Hence, the growth of the e-commerce sector will present new opportunities for Singaporeans with the relevant skills. 

Conclusion: Embracing a new paradigm for the Future Economy

32.         Achieving success in e-commerce, as with the transitions envisaged in other sectors, will require Government regulation that supports a more innovative eco-system. Regulators will have to be agile and adaptable, and stay up-to-date with a keen understanding of the latest advances in technology and business models. We have to be prepared to challenge our own rules and assumptions, and allow greater space for experimentation and new models, especially in emerging growth sectors.  In short, we must be prepared to take calculated risks.

33.         However, a more nimble regulatory framework alone will not be enough. It must be complemented by a mind-set that embraces innovation – in our businesses and among our workers. It calls for greater resilience and adaptability in the face of change.  Perhaps even more fundamental is the need to nurture a society that has a greater tolerance of risk and acceptance of failure, as innovation and enterprise cannot always succeed.   

34.         Ultimately, an innovation-led economic eco-system requires close partnerships between the public, private and people sectors.  As we strive to position Singapore’s economy well for the future, it is critical that all stakeholders step forward, contribute their ideas and play their part in the realisation of our vision.

35.         I therefore encourage you to actively participate in the CFE process and look forward to hearing more and diverse views. With the collective will and effort of businesses, workers and the government, I am confident that we can build a resilient economy to overcome the challenges, and seize the opportunities, that come our way.

36.         With this, I wish all of you a fruitful and engaging forum on our future economy.  Once again I would like to convey my congratulations and appreciation to The Business Times and Standard Chartered Bank on a successful inaugural event. Thank you.

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