Mr Lee Yi Shyan at the Ernst & Young Entrepreneur of the Year Awards 2006

SPEECH BY MR LEE YI SHYAN, MINISTER OF STATE FOR TRADE & INDUSTRY AT THE ERNST & YOUNG ENTREPRENEUR OF THE YEAR AWARDS 2006, THE GRAND BALLROOM, RITZ-CARLTON, MILLENIA SINGAPORE, TUESDAY, 21 NOVEMBER 2006, 7.25 PM

Mr. Ong Yew Huat,

Country Managing Partner, Ernst & Young

Mrs Fang Ai Lian,

Chairman Ernst & Young Singapore

Mr. Wong Ngit Liong,

President of Ernst & Young Entrepreneur Of The Year Singapore Academy

Entrepreneurs and Finalists,

Distinguished Guests

Ladies and gentlemen

Opening Remarks

A very good evening to all of you. Let me first thank the organizers, Ernst & Young, for inviting me to this prestigious event. I am pleased to participate in this celebration to honor the many achievements of the entrepreneurs represented in this evening’s awards.

This award is significant in two ways. First, it recognizes the outstanding attributes of successful entrepreneurs at the individual level. Evidence of personal qualities and effectiveness such as innovation, personal integrity and influence, strategic direction, his/her national and global impact, are assessed.

Second, the award reflects the quality of the enterprises we have. We all know that Singapore’s economy can only be as strong as the sum total of all our individual firms, of their competitiveness and their ability to create wealth. How well our firms do and their capacity for growth determines our economic future.

Global Environment

Yesterday, MTI announced that the Singapore economy continued to grow strongly at 7.2% in the third quarter of 2006, bringing growth for the first nine months to 8.6%. The robust growth was led by manufacturing and wholesale and the retail trade sectors on the back of strong external demand. Our economic forecast for 2006 has also been revised from 6.5 - 7.5% to 7.5 - 8.0%. In short, it looks like we will have a strong year in 2006.

Singapore is one of the most open economies in the world. At S$716 billion in 2005, our trade with the world is 3.7 times our GDP (S$194 billion in 2005). We are therefore more susceptible to any changes in world demand for the products and services than other economies. But this is not necessarily a weakness as we could maximize our growths when the external environment is favorable.

Singapore straddles strategically between the east and the west of Asia. Our trade with North Asia, which includes China, Japan, South Korea and Taiwan, has been growing steadily at 9.1% over the past 5 years. Trade with ASEAN has also been growing healthily at about 5% in the past 5 years. India, on our West, is opening up its market as well. And our trade with India has more than doubled from end 2001 to end 2005.

Apart from trade, Singapore firms have also become significant investors in the region. On a cumulative basis, Singapore is now the 6th largest investor in China, #1 in Vietnam, #3 in Malaysia, and #1 in Indonesia. Latest figures at the end of July also show Singapore to be the 2nd largest foreign investor in India.

Further afield, fast-growing markets such as the Middle East and Russia also offer Singapore firms many new and exciting opportunities.

It is a well known fact by now that the Gulf Co-operation Council (GCC) countries, or GCC countries in the Middle East have announced ambitious plans to modernize their economies. Saudi Arabia for example estimates that in the next 10 to 15 years, the kingdom will see new investments to the tune of US$1 trillion in not only the traditional sectors such as the oil and gas, but also in “10 new industries in 10 years (10 by 10 strategy).”Likewise, Qatar estimates that it would be investing US$100 billion in the next 5 to 10 years to develop its oil and gas, sports, education, medical and tourism sectors. Abu Dhabi in the UAE has also earmarked US$50 to US$70 billion in the next 5 years to develop itself into a modern and diversified economy.

Still other GCC countries have similarly ambitious plans. A number of them have invited Singapore Inc. to share both our software, in our operating know-how, and hardware or our investments dollars, with them. In fact, in a new city called the King Abdullah Economic City to be built 100km north of Jeddah, the marketing brochure boasts of it as “The Singapore in the Middle East”. It is therefore no exaggeration that Singapore is highly regarded in the Middle Eastern Markets.

Ability to Upscale

The questions for us are then: How do we turn these opportunities into profitable undertakings for our firms? What role should we play in the value chain with respect to these opportunities? How relevant are we for these opportunities?

In thinking of these questions, I would like share with you 3 of my wishes for Singapore firms.

Many of the projects we see in the Middle East are worth billions of dollars each. For instance, in October, Keppel Integrated Engineering (KIE) secured a US$1.7 billion contract to build and operate a solid waste project in Qatar. Earlier in April, SembCorp Industries entered into a US$1.7 billion joint venture with the Abu Dhabi Water and Electricity Authority (ADWEA) to buy the Fujairah-based Independent Water and Power Plant.

And there are many other large scale projects still out there, including airport, seaport, logistic parks, science parks, new cities and townships, public transport infrastructure, universities and educational institutions. It would be a great pity to see these opportunities pass us by, or see our firms play only a very small part in these opportunities. If this happens, we would miss the lift that these opportunities could give us.

If our firms are able to scale up their operations to take advantage of these opportunities, they would be presented with project opportunities that are not available to small players. They could derive better IRR at the Principal level than at the sub-contractor level. With a large enough scale, they would have better access to funding and other critical resources including international talents and technology. With a large enough scale, our larger firms can also partner with and bring along smaller Singapore-based firms to establish themselves in international markets.

My first wish is therefore that our firms become savvy in their growth strategies. Apart from organic growth, our firms should also develop capabilities to work with other Singapore firms and international partners to secure larger deals. Taking a consortium approach would share out risks and leverage on each other’s expertise. For some of our firms, they should also develop competencies in Mergers and Acquisitions (M&A) as an additional means to build up local capabilities in global markets rapidly.

Talent Development

My second wish is for Singapore firms to be better able to attract international talents. As business opportunities beckon from near and afar, our firms will find their resources stretched and thinly spread. I believe the ultimate constraints to our firms’ international growth is the finite size of their talent pools. How then can firms enlarge their talent pool?

I would suggest our firms consider developing both in-house talents as well as aiming to attract regional talents. Consider granting scholarships and training programs for young and in-house staff to build-up a pipeline of talent. Companies should also start to adopt the HR policies of leading international companies, attracting, developing and rewarding talents across geographies and countries. For owner-entrepreneurs, they have to develop the next line of leadership. For professional CEOs, they have to amass talents from across regions, and promote meritocracy in talent development.

Some 10 to 12 years ago, when I was in EDB, I used to help out in campus recruitments at the Ivy League universities in the USA. It was then that few Singapore companies, if at all, could offer job opportunities matching those offered by the top global consulting and investment banking firms. It was clear to me then that for Singapore firms to one day realize their global aspirations, they will need to have their fair share of the world’s best talents.

I just looked up some recent reports. The average annual salaries of 28-year old MBA graduates from the top 17 MBA schools in Europe and USA, is about US$153,000. Of course, to command such premiums, these young MBA graduates need to be playing critical roles in the value chain of the businesses. Not all our firms will need MBA graduates from top business schools. But allowing ourselves to think that our firms would never need the best global talents, is a self-limiting thought. In the end, our firms must be able to source a continual supply of the best talents, wherever they may come from, to compete internationally and succeed.

Proud of and Being Rooted in Singapore

My third wish is for all our successful firms to continue to be rooted in Singapore. We should not take this for granted and assume that all successful Singapore firms, while they expand overseas, will automatically assume a home-bound orientation..

Rooted-ness in Singapore may mean anchoring your headquarters and main operations in Singapore. By doing so, you not only create wealth for your firms, but wealth for Singaporeans too. You will be a partner in creating more and better jobs, nurturing and developing our local talents to help them gain new skills, a partner with the unions and the Government; and be part of the many helping hands involved in building up Singapore society.

I believe that success should be viewed in a wider context such as being able to contribute back to society and community. I therefore particularly like the fact that Ernst & Young has included “the national and global impact of the business” as part of its judging criteria. Beyond pursuing financial excellence, our enterprises can make meaningful contributions to the society it operates from.

At the last parliamentary debate, the issues of widening income gap and structural unemployment were extensively discussed. For the former, the well to do in the society can give a helping hand to the less accomplished so that they feel a sense of progress and hope. For the latter, re-learning and re-skilling are the only ways to stay relevant to the fast changing job scene. In this respect, our firms should work with unions and the government on programs on re-skilling, job-redesign and life-long learning.

The winner of this year’s Nobel Laureate for Peace, Mr. Muhammad Yunus, has proven that it is possible to combine business objectives with social purpose. The Grameen Bank’s micro-credit model is a social enterprise project that has not only provided individual financial success, but one that has also helped millions escape poverty with small-scale loans.

I know for a fact that many of the entrepreneurs gathered here this evening are sterling role models, contributing their talents, time and resources to many community and social causes. I applaud your fine examples.

Concluding Remarks

In conclusion, let me say that we are well placed for the next stage of growth. Our external environment is generally favorable. Consumption in Asia is poised to increase with the growing middle classes. China and India are becoming consumption markets themselves. Middle Eastern countries are looking up to Singapore’s experience to replicate similar development in their countries. There are more opportunities than our firms can participate in.

On the home front, the two IR projects have injected new enthusiasm and hastened the pace of our urban renewal. Our investments in R&D will equip us with long term competitiveness. So long we continue to innovate, and stay ahead of competition; Singapore and our firms will enjoy a bright economic future.

Now it remains for me to offer my heartiest congratulations to all the participants and winners of the “Entrepreneur of the Year Awards”.

Thank you and have an enjoyable evening.