Mr Lee Yi Shyan at the 24th Annual Singapore 1000, SME 1000 & International 100 Awards Dinner, 21 Jan 2011

Embargoed till after delivery Please check against delivery Speech by Mr Lee Yi Shyan, Minister of State for Trade and Industry, At the 24th Annual Singapore 1000, SME 1000 & International 100 Awards Dinner at The Ritz Carlton, on Friday, 21st January 2011

Mr Ken Sansom, Chairman, DP Information Group

Mr Steven Phan, Country Managing Partner, Ernst & Young

Ladies and Gentlemen,

Introduction

Thank you very much for inviting me to this distinguished gathering of Singapore Business Leaders.

Growing economy

Since the inception of Singapore 1000/ SME 500, the collective revenue and profit of the list has grown. In a way, their growth more than mirrors that of our economy. The Singapore 1000/ SME 500 list of companies have played a key role in leading the growth of our economy, with higher than average growth and profitability.

Can we cross the S$1 trillion mark?

Recently, I came across a report that projected our GDP crossing the S$1 trillion-mark in 2040. Calculating backwards, I figured that the author had assumed an average growth rate of 4.3% compounded for next 30 years raising our GDP in 2010 from around $280 billionto more than $1,000 billion in 2040. This assumption is not inconsistent with our long term projection of 4-6% growth for Singapore.

However, any straight line projections like this can be easily dismissed for its over-simplicity. 40 years ago, in 1970, Singapore’s GDP was a mere $16.6 billion. Who would have thought that it could grow 17 times to $280 billion, as per what we saw in 2010?

So the question is: are we likely to achieve the S$1 trillion GDP in or by 2040, given the constraints and opportunities we know today? Some might find such projections overly ambitious, others might even challenge the fact that $1,000 billion is only 3.5 times our current economy, that we should aim higher.

I don’t think we will arrive at an answer this evening. But the question itself allows us on rethink what is needed to secure sustainable, long term economic growth.

Productivity the Answer

For us to grow between at an annual pace of 4-6%, we have to raise productivity so that it would account for two-thirds of our GDP growth. This works out to be an annual 2-4% productivity growth.

At the firm level, raising productivity with constraints in headcount has many strategic and operational implications. Owing to time constraints, let me leave you with three points for consideration.

Firstly, the business model. It will be fair to say that over the past 30 years, we have seen many of our SMEs growing into large companies. Many grew from Singapore’s small domestic market to regional players. A good number ventured into India and China while some even secured footholds in faraway locations in North and South America, Europe and Africa.

Those who are successful have internationalized. They positioned themselves in the economies that offer large market with higher growth rates. They achieve exceptional growth because they offer something unique that the markets needed.

All these however, can change over time when new competitors enter the market. Our firms must continually move up the value chain ahead of competition. This is why we need to increase our innovation capacity and invest in R&D.

To steer the economy into higher productivity, the NPCEC (National Productivity and Continuing Education Council) chaired by DPM Teo Chee Hean was formed last year to map out the productivity road-maps for 12 identified industry sectors, and strengthen the national framework to provide continuing education and training. The council will provide direction on national and sectoral plans, but it is up to our firms to pursue innovations in their business models, products and services.

Secondly, multinational talent. To manage business across geographies, our firms must have managerial and functional talents who are comfortable operating across cultures, especially across the varied Asian cultures. Within Singapore, we will develop our indigenous manpower to the best we can. Where we are short, we will continue to attract high quality manpower to augment our own. We will need to pay special attention in integrating them, so that we function as one effective tea,, not a collection of individuals.

In my travels to North Asia and the Middle East, I often come across Singapore firms undertaking many projects in the two culturally diverse regions. One moment they may be tasting Arabic coffee and dates; next they are dining with Maotai and Jiao-Zi. Having people who understand local culture and the way business is done is an asset to any internationalizing firm.

The contrary is true too. When firms can’t find the talents they need, they have to turn away projects and contracts. One CEO told me he spent half his working time looking for good people to recruit. I don’t think he was exaggerating.

For Singapore 1000/ SME 1000 companies to do better than their counterparts in Asia, their Chairmen, board members and CEOs must focus on talent development.

To enhance the development of leadership and human capital management skills among our business and HR talents, MOM has partnered the Singapore Management University to establish the Human Capital Leadership Institute (HCLI). This is a premier institute that will leverage on thought leadership to provide degree and executive programmes, conduct seminars on talent management and leadership, and practical research on HR practices in the Asian context.

Thirdly, Managing Meritocracy and Diversity. Singapore succeeds because we believe in meritocracy. Regardless of creed and race, people are recognized and promoted based on merits and abilities.

As our population and workforce grow, the challenges of diversity will also grow. It is crucial for our business leaders to continue to espouse meritocracy while playing a key role in integrating foreign talents and new citizens into the workforce.

At the firm level, Chairmen and CEOs should also ensure that their internal processes are designed in such a way that they reward the best performance fairly and transparently. This is why we need to focus on skill upgrading, not for a section but for the entire workforce who collectively define the productivity level of firms.

Recognizing the challenges which SMEs face in attracting fresh talents, SPRING rolled out two new programmes last year: (a) the Management Associate Partnership to help high-growth SMEs attract, develop and retain fresh talents; and (b) the Enterprise Internship Programme to expose local university and polytechnic students to the dynamic and rewarding working environment in high-growth SMEs through short term internships. Through these programmes, high-growth SMEs can better influence young talents during their school days to consider joining SMEs as an attractive career choice.

In terms of Continuing Education & Training, the government announced last year that we would invest S$2.5 billion over five years to prepare the Singapore workforce for the future. The CET system will continue to be industry focused, adult centric and outcome-based. In addition, we will take into consideration various trends such as:

a. The workforce of the future – nearly 50% of our resident workforce will have at least a diploma qualification by 2020, compared to 36% in 2007.

b. Emerging and growth industries – to equip Singaporeans with the skills for job opportunities in new growth industries, whether they are preparing for new jobs, switching careers or acquiring new skills.

Since the launch of the CET Master plan by PM in 2008, we have made significant progress in expanding the training programmes and infrastructure of the national CET system. Our national training framework, the Workforce Skills Qualification (WSQ) system provides training at different levels to cater to the different training needs of our adult workers. More than 200,000 workers were trained under the WSQ system in the first 9 months of 2010 and over the last 5 years, more than 500,000 workers have undergone WSQ training.

To help PMETs develop horizontal skills, the Human Resource and Leadership & People Management Frameworks were developed under the WSQ system. These frameworks consist of a comprehensive suite of courses. There are currently more than 60 such courses for HR practitioners and people managers to strengthen their competencies.

Conclusion

Ladies and gentlemen, in 30 years, we have developed a resilient and diversified economy that rebounded with amongst the world’s highest growth rates in 2010. For a resource-poor Singapore, human resource is the single most important factor that differentiated us from competition.

In the next 30 years, our economy will expand further. We will be a well-connected, value-adding and vibrant node of a globalized web of know-how, trade and investment flows. We need not be large, but we can be effective. Our firms will grow provided they muster enough quality talents and integrate them well as they expand.

Talent management cannot therefore be an after-thought, nor relegated to the Human Resource department. It ought to be the strategic priority of the board-rooms of our Singapore 1000 and SME 1000.

On this note, may I wish all of you, great success in building your teams.

Thank you.