Opening remarks by Minister Chan Chun Sing for Quarterly Economic Survey 2Q2020 Press Conference

“We are not returning to a pre-COVID world. We must chart a new path now.”

Members of the media

1. You have just heard our second quarter GDP figures.

a. To put things into context, this is our worst quarterly performance on record.
b. The forecast for 2020 essentially means the growth generated over the past two to three years will be negated.

2. The numbers reflect the impact of Covid-19, as well as deeper forces reshaping the global economy and our position in the world.

3. I know that some are still hoping for a quick recovery, and a return to the familiarity of the “old normal”.

4. The painful truth is this:

a. We are not returning to a pre-Covid world.
b. Recovery will be some time yet.
c. And the recovery is not likely to be smooth.
i. We can expect recurring waves of infection and disruption.
d. Furthermore, recovery will be uneven across sectors.
i. Some sectors will progressively recover, while others will be permanently changed.

5. We have to start now to build a new economy, and to create more job opportunities for our people.

a. We cannot wait for Covid to blow over.

“We are not returning to a pre-COVID world”

6. The world has changed irrevocably in four areas.

7. First, the geopolitical environment which had allowed us to thrive in the last 50 years has changed.

a. The tensions amongst the major powers are increasing.
i. The competition and tension permeate not just politics, but also trade, technology, and security.
b. And because the benefits of globalisation have been unevenly distributed, the merits of free trade and global integration are increasingly being questioned.

8. We hope that the geopolitical issues will not spill into open conflict

a. This will further destabilise the rest of the world.

9. We must avoid being caught between the conflicts of the major powers, or be stranded in a fragmenting world of trade relations and technological standards.

10. One simple example of the challenges.

a. If we do business in China, we communicate with our Chinese counterparts by WeChat. They can’t access Whatsapp.
b. If we do business in the US, we use Whatsapp. WeChat may not even be available in the US in future. Frictions like these will be inevitable in a more complicated world.

11. The second factor is the way global companies are re-organising their production and supply chains.

a. Companies are reviewing the need for regional hubs, thanks to digital technology and ubiquitous communications
i. A few have decided to just have one global HQ, and local centres where their customers, production or specialised talent are.
b. Manufacturers are reviewing where their factories are sited.
i. Many are shifting from a focus on efficiency (“just in time”) to resilience (“just in case”). They want to diversify their operations, markets and supply chains, so that they are not dependent on any one site.
ii. On one hand, new investments will come our way. For instance, some manufacturers are thinking of a China + 1 strategy and actively looking at ASEAN including Singapore
iii. On the other hand, some existing investments may diversify from Singapore, especially where Singapore is the sole manufacturing site for some MNCs
iv. It is a fluid landscape and we must do everything we can to defend our capabilities and capacities, while winning new ones.
v. We must also harness our competitive advantages of legal certainty, intellectual property protection, connectivity and policy consistency and coherence, to overcome our constraints in land and labour.
c. The nature of tax and how it affects investment decisions have also changed.
i. US has already made a major tax overhaul.
ii. Many countries are spending more than they are bringing in and there is pressure from them to collect more tax from MNCs and to pressure companies to do more in their home countries, rather than overseas.
iii. Some countries have unilaterally taken measures to tax digital activity and are looking to do more.
iv. They are also asserting their influence through global platforms like the OECD.
v. All this will affect companies’ investment decisions overseas, including in Singapore
d. These circumstances provide us opportunities, but also challenges.
i. If we do not adapt quickly, Singapore could be bypassed.

12. Thirdly, the nature of jobs has changed

a. Covid has shown companies and workers that remote working is possible.
b. Over the years, we have successfully created many jobs here, especially PMET jobs for Singaporeans, by having many HQs and factories locate here.
i. With remote work, more global job opportunities for our workers will come.
ii. But it also means that other workers, in other countries, can do our jobs from their homes
c. Noticed that some jobs in HQs here are being advertised as “can work in Singapore” or “can work remotely”.
d. This will affect many PMETs, for which jobs can either be done virtually, or through automation and AI.

13. Fourth, as the economic pie grows more slowly or contracts, it will cause more societal frictions and tensions:

a. between those who have more and those with less; and
b. between foreign and local, or even SC and PR.

14. The calls for greater protection, and more redistribution can be expected in many societies, including ours.

a. We cannot isolate ourselves from the world.
i. Without the world as our hinterland and market, we will reduce Singapore’s economic manoeuvring space, and limit rather than expand opportunities for our people.
b. We will need to better take care of those affected by job and business losses. We have and we will continue to do these in a sustainable way that is not divisive, affirm the dignity of work and strengthen our social fabric.
c. These tensions, unless well managed, can divide our society.

15. This is not the Asian Financial Crisis or Global Financial Crisis where we hunkered down, waited, and things improved in a few months.

a. If we wait it out, we will likely be in worse shape than we are now.

16. Therefore we must chart a new direction now.

a. for a very different and uncertain future.

17. We do not have all the answers yet, and the ground realities are fast evolving, often without precedence

a. But we know that staying still is not an option.
b. We must walk this new path together. Everyone must chip in.
c. Including with ideas and suggestions, for we are in uncharted waters
d. We must work together with our people to help them understand the need for changes and implement them smoothly.

18. In the next few months, we will provide regular updates on the economy and job situation, sector by sector.

a. We will involve the unions, trade associations and employers
b. We will visit companies in various sectors, work with unions and associations, discuss with them the changes and chart the way forward together to get us through this crisis.
c. Challenges will not define us. It is how we respond to these challenges that will define us.

Way Forward

19. While the path ahead is unclear, we will hold on to three principles as we chart this new path ahead.

20. First, we will open for business, safely and sustainably.

a. It will not be a binary option of open or close. It can be done.
i. We must stay open while isolating the impacted clusters quickly and tightly.
ii. Doing it progressively and systematically, to know which are the high-risk areas.
iii. Learn from the experience of others
iv. Manage the spectrum of risks from different activities proportionately and put in place tighter measures for the higher risk activities.
v. Above all, if we each exercise social responsibility, we can permit more activities with less risk.

21. Second, we will help our businesses and workers make sense of and adjust to the new world. There are three archetypes of firms.

a. The first group of firms are those with opportunities, notwithstanding COVID-19 and perhaps because of COVID. We will give a boost and help these firms grow.
i. Because as they grow, they will create more jobs and opportunities for our workers
ii. Examples of these include many in the ICT, biopharma, supply chains and precision engineering sectors.
iii. The competition for these new investments has become more intense. We will continue to create a more attractive environment for new businesses to start and for businesses to plant their investments here for the long-term.
1. Compete for the new industries that entrench our role in the global value chain
2. It is not just about making money now. It is about building resilient and sustainable systems for the future.
3. And job creation in the next one to two years will be important, beyond just VA captured.
4. Jobs preserve dignity and livelihoods of our workforce, and the confidence of investors.
b. The second group of firms are those who are suffering a drop in demand now but will eventually recover. We will preserve their core capabilities in the meantime and help them emerge stronger.
i. Helping these companies with their cash flows from JSS to rental relief schemes are part of these overall efforts.
ii. Over time, we should re-direct the support towards helping them generate fresh revenue and become more cost efficient
iii. Some F&B companies, such as A-One F&B Group, built new revenue streams in products and delivery, even after dining-in resumed
iv. Some enrichment classes and event companies have expanded to online events and services, to build new revenue streams and to adjust to the new way companies are working.
c. The third group of firms are those in industries that have permanently changed. This is the most difficult part. We will help them reinvent themselves, pivot into new markets and new products.
i. Some businesses are already acting now. They know the old days will not return.
ii. Many of the mass market tourism, MICE and social entertainment companies are thinking and acting along these lines already. And we will help them along.

22. We know that these are tough decisions to make

a. But they are necessary for us to overcome the crisis together.
b. The faster we adapt and change, the faster our recovery
c. Conversely, the slower we adapt and change, others will overtake us, and the opportunities will bypass us.

23. Third, the Government will fully support our businesses in this process by establishing the right macro conditions.

a. To preserve Singapore’s ability to compete for jobs for our people, we will strengthen our links with the world for markets, supplies, technology and talent
b. Our aviation and port hub status can never be taken as a given.
i. We will fight to preserve our networks and capabilities.
ii. We will say more in the coming weeks.
c. Our business and financial hub status depend on strong connectivity with the world – be it people, data, finance or legal.
d. We will continue to break new grounds for Digital FTAs to open more markets for our businesses while preserving access to conventional markets through conventional Free Trade Agreements.
e. We will continue to invest in our people and train them for tomorrow’s jobs.
i. We will strengthen our job matching efforts.
ii. Minister Josephine Teo will share more.

24. In the coming months, retrenchments will rise, some companies will be forced to close, and it will be a difficult time for our people and businesses.

a. Companies must treat workers fairly, with dignity and respect.
b. We will help our people to take on new jobs with new skills
c. We must preserve the Singapore core for skills and capabilities.

25. We are in a crisis of a generation. But we are starting from a much stronger position compared to the Merdeka and Pioneer generations.

26. Over the last 55 years, we have built up a strong reputation for being a trusted place to do business.

a. We have developed strong networks and connectivity with the rest of the world.
b. We abide by the rule of law to give certainty to our investors.
c. We have a highly skilled workforce and we have strong tripartite relationships.

27. All these factors will put us in good stead in the coming months as we compete for investments to create new job opportunities for our people.

a. All our government agencies will work together to make sure, externally, we provide the best conditions possible for our companies to do business and remain connected with the world.
b. Internally, we will make sure that we provide the strongest possible reasons for others – both locals and foreign companies - to want to invest in Singapore and create those jobs for fellow Singaporeans.
c. And as Minister Josephine Teo mentioned, we will strengthen our efforts to help match jobs with our people and to train them to acquire those new jobs with new skills.

28. Our promise to all Singaporeans is this. While the future may be uncertain, while conditions might be challenging, our commitment to every Singaporean remains unchanged.

29. We will do our utmost to prepare our people for the challenges ahead for us to not only to survive, but to thrive in the new environment. And we will not wait for the COVID-19 situation to roll over. We will start now, refreshing our economy and building those new opportunities of people and the next generation.