Speech by Minister S Iswaran at MTI Economic Dialogue 2016

​Speech by Mr S Iswaran, Minister for Trade & Industry (Industry) and Co-Chairman of the Committee on the Future Economy at MTI Economic Dialogue 2016 held at Singapore Management University on 6 September 2016, 6.15pm

SEIZING GLOBAL OPPORTUNITIES IN OUR FUTURE ECONOMY

Professor Arnoud De Meyer, President, Singapore Management University

Faculty and Students 

Ladies and Gentlemen

1. I am pleased to join you this evening at the eighth MTI Economic Dialogue. This annual forum is a valuable opportunity for us to discuss topical economic issues with students, as well as to recognise students of economics who have produced outstanding pieces of research and done well in their studies.

2. Let me start by congratulating this year’s thesis prize winners – Ng Woon Chian from NUS; Hu Zehui, Yang Yi and Long Zijie from NTU; and Tan Bing Yang from SMU. They have all excelled in research in their respective universities.

3. I would also like to congratulate the economics book prize winners – Desmond Toh from NUS, Christine Toh from NTU and Kelly Goh from SMU – for their outstanding performance in their third year of studies.

4. This evening, we are also presenting the Economist Service Scholarships to two students who have demonstrated the aptitude and a keen interest to serve as public sector economists. My congratulations to the scholarship recipients, Sarah Liu and Joshua Wong, who will be proceeding overseas for their studies.

Challenges and opportunities facing the Singapore economy

5. Today, I would like to share with you some perspectives on the economic challenges and opportunities facing Singapore, as well as the strategies that we can adopt to maintain our economic competitiveness.

6. As many of you are aware, global growth has been sluggish in recent years, amidst heightened uncertainties including those arising from “Brexit”. The weakness in external demand has affected our exports, contributing to slower growth in the Singapore economy. At the same time, competition has intensified as regional countries move up the value chain.

7. Notwithstanding these challenges, there are opportunities that Singapore can leverage on to sustain economic growth, create good jobs and raise wages for Singaporeans.  In particular, I would like to touch on two key areas of opportunities.

8. The first is in terms of geographical markets.  While advanced economies and China remain important final demand markets for Singapore, two regional markets hold strong potential for our businesses – ASEAN and India.  A recent MTI study shows that the ASEAN-5 economies, comprising Indonesia, Malaysia, Philippines, Thailand and Vietnam, have overtaken the US as the largest final demand market for Singapore.  With the establishment of the ASEAN Economic Community, which will boost intra-ASEAN investments and trade flows, as well as a rising middle class in the region, ASEAN will continue to present significant opportunities for our exporters and businesses wanting to internationalise. 

9. India is another market with strong growth potential.  India enjoys a demographic dividend with its young working age population, and recent economic reforms have also eased some aspects of doing business in the country.  As India’s economy grows, its demand for imports and investments will increase in tandem, thereby providing opportunities for our businesses.

10. The second area pertains to opportunities in the digital economy. With the increasing penetration of the Internet and millions of digitally-empowered consumers worldwide with computers, tablets and smartphones, the digital economy presents unprecedented opportunities for our businesses to achieve scale and serve customers globally.  I will elaborate more on these opportunities later in my speech. 

Committee on the Future Economy 

11. Against this backdrop, the Committee on the Future Economy, or CFE, was formed to identify areas of growth, and to develop strategies to position the Singapore economy for the future.  The CFE process has harnessed the diverse experiences and perspectives of leaders from the public, business, labour and people sectors, as well as academia.  Since its formation, the CFE has had many rounds of discussions with different stakeholders, and will finalise its recommendations by the end of the year. 

12. For now, let me share with you three areas that the CFE is looking into to enable Singapore to capture global growth opportunities. 

Positioning Singapore as a digital hub

13. The first question is – how can Singapore position itself as a digital hub and play a key role in the global flow of digital goods and services?  There are at least two ways in which Singapore companies can benefit from the digital economy.  First, companies can leverage on e-commerce platforms, and develop new payment tools and logistics services, to reach customers in new markets in the region and beyond.  Second, companies can tap into the burgeoning demand for data analytics and digital solutions, as more businesses recognise the economic value of their data resources. 

14. A McKinsey Global Institute report shows that about 12 per cent of global goods trade is now conducted via e-commerce.  And, the rise of e-commerce platforms has enabled companies, regardless of size, to access a global consumer base and sell to world markets.  Amazon is a well-known and established e-commerce platform which hosts some two million third-party sellers.  Local examples include successful start-ups, Lazada and Zalora. Yet, according to a study by A.T. Kearney, Singapore, along with the ASEAN-5 economies, account for less than 1 per cent of global e-commerce, even though we make up 3 to 4 per cent of global GDP.  This illustrates the enormous potential that e-commerce holds for the region.  Hence, we want to encourage our companies, from the smallest to the largest, to seize the opportunities that e-commerce platforms provide by being early adopters of digital strategies to expand their reach and meet consumer demand in both regional and global markets.

15. Singapore companies can also take advantage of the increased demand for digital goods and services by providing enabling services such new payment services to streamline transactions.  Garena which started as an online social platform for people to chat and play games, has pioneered a “reverse-ATM” network, enabling customers in countries such as Indonesia, Thailand and Vietnam to convert cash into digital currency, which can then be used to buy online games, pay bills and conduct e-commerce transactions. 

16. At the same time, the push towards digitisation brings about opportunities for companies providing data analytics and other digital solutions.  Let me give you an unlikely example to illustrate how prevalent data analytics has become.  Many of you would know of Leicester City’s unlikely triumph (at 5,000 to 1 odds) in the English Premier League last season.  What is less well known is how the team used data analytics (the club’s players wear GPS-enabled vests during training) to track distance run, acceleration, deceleration, change of direction and risk of injury, thus allowing the managers to optimise performance and reduce injury.   (The club had the fewest injuries compared to any other Premier League club last season on its road to the title.)  The comparative data is also used for pre-match preps, post-match debriefs and half time analysis with players. 

17. Like football clubs, many other businesses and organisations have begun to harness data analytics and employ digital solutions, for example in product and supply chain management, to improve their operations.  ASEAN, as a whole, has already seen its Infocomm Technology (ICT) sector grow at a rapid pace, with ICT investments growing by more than 15 per cent annually.  This pace of growth will accelerate as governments in the region take active steps to harness the potential of digitisation.  Apart from Singapore’s Smart Nation initiative, other countries like Thailand have also embarked on their own digitisation plans. Our companies in Singapore must seize this opportunity and be at the forefront of providing digital solutions and data analytics services to the region and beyond. 

Positioning Singapore as an innovation-led economy 

18. The second question is - how can Singapore become an innovation-led economy?  Innovation has always been important for businesses in order to stay ahead of the competition, open up new markets, and gain a firmer foothold in existing markets.  It has become indispensable in today’s hyper-connected and intensely competitive globalised economy.  

19. Consider Xiaomi, a Beijing-based electronics company known for its high quality and affordable smartphones.  To keep costs down and make inroads into emerging markets, Xiaomi sells almost all its phones online, enabling it to compete with more established brands.

20. Xiaomi’s rapid growth is also propelled by its customer-focused innovations in marketing and after-sales services.  Eschewing traditional forms of advertising, the company leverages heavily on social media to reach out to and engage its customers as collaborators.  Through online feedback, Xiaomi has been able to improve its products to meet customer needs; for example, by making changes to the voice recording app on its phones to allow recording even when incoming calls are coming through.  To give you a sense of Xiaomi’s social media efforts, the company’s online forum has about ten million registered users.  It also employs fifty full-time employees to engage consumers on social media alone.  Similarly, in response to consumers’ demand for top-tier after-sales services, Xiaomi launched “Pick Mi” in India, which provides consumers with the convenience of a home pickup, repair and drop-off after-sales service.  These efforts have propelled Xiaomi to success, not only in the Chinese market, but also in overseas markets such as India. 

21. The Xiaomi example, and others in Singapore, highlight how product and business model innovation can help companies to expand their consumer base and drive the demand for new products and services. 

Equipping Singaporeans with the relevant skills and mindsets 

22. Finally, how can we equip Singaporeans with the skills and mindsets relevant for the future.  

23. We must ensure that our pre-employment and continuing education systems nurture a deep mastery of skills and knowledge in order to keep pace with fast moving industries and disruptive technologies.   Hence, I am heartened that there are many opportunities for our students to hone the skills which are relevant to your chosen careers.  Apart from internships and industry talks, education institutions are also collaborating with companies to incorporate industry-relevant knowledge and experiences in their curriculum.

24. For example, the NUS School of Design and Environment’s Medical Design Studio engages its students to come up with designs that contribute to the medical field, through collaboration with the National University Hospital and product design firms such as Xentiq.  Some of the products developed include HAND, a surgical simulator that enables young surgeons to practise hand surgery, and Marrowtap, a medical instrument which delivers a safer and more efficient bone marrow examination procedure.  Such learning experiences not only allow companies to benefit from the creativity and energy of the students, but also give students the chance to apply their knowledge in real world contexts, thereby improving their skills and proficiency in their areas of specialisation. 

25. Such skills must be complemented by a greater appetite for risk and tolerance for failure; a willingness to venture into unchartered waters and embrace opportunities, and stay resilient and flexible in the face of adversities.  Researchers from the Stanford Graduate School of Business have found that there are two types of mindsets when it comes to how people view and respond to failure.  The Type 1 mindset is fearful of making mistakes; the Type 2 mindset is fearful of losing out on opportunities. A Type 1 mindset is reluctant to take risks which, in turn, impedes innovation and breakthroughs.  A Type 2 mindset is more adventurous and entrepreneurial, viewing “failures” as moments of insights and stepping stones towards the next breakthrough.  As the inventor of the electric light bulb (and many other devices) Thomas Edison famously said “I have not failed. I’ve just found 10,000 ways that won’t work.”

26. As we move towards a more innovation-led economy, there is a greater need for the Type 2 mindset, to take calculated risks and accept setbacks as a learning experience.  Those embarking on new careers should to seek experiences out of your comfort zones such as taking on overseas postings, especially in emerging markets.  Apart from helping to understand the business culture, consumer preferences and operating environment in these markets, it will have an indelible impact on your personal development.  Such attributes and experiences are also recognised and valued by companies seeking novel growth opportunities.  

Conclusion

27. Let me conclude.  The future economy holds significant opportunities for all of us.  The digital economy allows good business ideas to take root in any part of the world, presenting unprecedented potential for enterprises.  It has never been easier for companies with innovative products, services and business models to reach global markets.  To tap on this potential, our businesses must continually innovate, as well as adapt to and embrace the digital economy.  On our part, Singaporeans must continue to deepen our skills and capabilities so that we can be nimble in the face of rapid technological changes and evolving industry trends.

28. With our industry, people and Government working collectively towards a shared vision for our economy, we can continue to grow and create good jobs for all Singaporeans.  Thank you.