Speeches
Speech by Dr Ng Eng Hen, Minister for Education and Second Minister for Defence, at the SMU Lee Kong Chian Ministerial Forum on Wednesday, 11 March 2009, at 5pm at the Singapore Management University
Mr Ho Kwon Ping, Chairman, Singapore Management University Board of Trustees;
Professor Howard Hunter, President, SMU;
Distinguished guests;
Ladies and Gentlemen
A New World Order
I would like to thank Mr Ho Kwon Ping and Prof Howard Hunter for this honour to speak at the 2nd Lee Kong Chian Ministerial Forum. My first close-up encounter with SMU was when I joined the Government in 2002 as Minister-of-State for Education. SMU had just been established in January 2000, with its first intake at the Evans Road Campus. I visited SMU at that campus and remembered being impressed by its faculty and students. Formed barely two years ago, I could already sense the distinct character and enthusiasm at their temporary campus. At the Ministry of Education (MOE), when it came to discussions on SMU, I noted a similar excitement and expectancy - much like mixing reagents in a chemistry experiment and anticipating a bang - not exactly knowing the actual outcome because something new and different was being attempted with SMU. In that regard, SMU has succeeded very well. Despite being a fledgling university, you have been able to differentiate your brand to attract bright JC, Poly and overseas students. It is not just because you have a fabulous campus in town, in a growing area known to be trendy and hip, akin to the Village in Manhattan, although that obviously helps. On the ground, it has become conventional folklore among teenagers that you had to have that something extra to be at SMU. Over the years, I watched with satisfaction, as the business community and industry also gave high marks to your graduates. They must have been impressed with your confident bearing, energy and competence—there was an edge that SMU’s graduates possessed. In my discussions with foreign academic dons, they too were impressed with how far SMU had come in such a short time. So objectively, we can comfortably say that SMU has had an excellent start and first decade. The credit must go to the Board of Management, your faculty and most of all, to the pioneer batches of SMU students.
This 2nd Lee Kong Chian Ministerial Forum is held, I believe, in a cusp of history. Very rarely will any Government leader pronounce a need for a New World Order openly. But recently, a litany of such calls has occurred. In Sept last year, French President Nicolas Sarkozy proclaimed that “we need to rebuild the whole world financial and monetary system from scratch.” During the recent G7 meeting in Rome, Italy’s Finance Minister Giulio Tremonti said, “A new world economic order might seem rhetorical, but it is a true goal we should be aiming towards.” Just two weeks ago, UK Prime Minister Gordon Brown called for a “new global order” to deal with this crisis and to prevent the emergence of “financial mercantilism”, as he prepared to meet World leaders for the G20 meeting in London this April. Chinese President Hu Jintao has similarly called for a reform of the international financial system which he believes should aim at establishing a new international financial order that is fair, just, inclusive and orderly.
That the global financial crisis has precipitated this calling for a new Order is stating the obvious. But the consequences of radical change to come in the ensuing transition and post-crisis Order can lead to a different World. We should be forewarned, alert and prepared. The effects on individual countries—including that on Singapore and Singaporeans—may not always be immediately apparent or easily projected. Let me illustrate this truism with two recent episodes when the World did change on us.
A Fallen Wall, A Torn Curtain And The Collapse of Two Towers
My first example is marked by the fall of Walls—to be precise, the literal hacking down of the Berlin Wall on November 9, 1989 that marked the end of the Cold War and in parallel, as with the parting of the Bamboo Curtain, when China joined the World trading community on its path to modernisation begun by Deng Xiao Ping. The triumph of Capitalism over Communism as an ideology for World Governments was clear, but in retrospect, it was too simplistic an epiphany over what would eventually emerge. Few foresaw the entirety of consequential changes it would bring.
Everyone sensed that change was in the air but not the exact magnitude and specific effects. Globalisation did lift hundreds of millions out of poverty across the World but the entry of 700 million workers from China into the labour market had a profound impact on wages worldwide. It forced the relocation of centres of production as global flows of capital, technology, and labour could be transplanted in a borderless World. These pressures became accentuated when a further few hundred million more workers from India and Eastern European countries entered the global trading system. Prices of goods came down but for the workers in many small towns across America and Europe who lost their jobs when factories closed to be re-located elsewhere, it was hard to relate their misfortune to events that began with the fall of the Wall and Curtain and the benefits of Globalisation. While they could not fathom the sequence of reactions over time and space, the loss of livelihoods was no less real. Neither was it thinkable then, that just barely two decades later, we would now have a China with a per capita GDP of US$3,200, holding over 700 billion US dollars in US Treasury securities, or that the US Secretary of State would ask the Chinese Govt to buy more US treasuries!
The second example of recent World change and its unanticipated consequences is also marked by a falling edifice, but of a different kind. Yes, I am referring to the cataclysmic collapse of twin towers following the Sept 11 attacks by terrorists in 2001. The ensuing effects have been global and run deep. It has been the main driver for direct policy changes related to security, and influenced economic and political ties for almost all countries. Even far away Singapore has been impacted. Who could have imagined then that we would send ships, aircraft, helicopters, engineers, medical personnel and other troops to the Arabian Gulf and Afghanistan? How long will this struggle take? Or, asked in another way, if atheistic communism took 50 years to be proven wrong, how much longer will it take for this form of terrorism to end? Misguided and exploited as they are, fervent followers and would-be suicide squads believe that they are faithful to a higher calling, and are righting egregious wrongs and injustices. In the end, the free World will overcome, but we would do well to remind ourselves that this present lull is temporary. This competing ideology based on falsehoods and psychological terror has not run its course.
These two examples and many similar others before them teach us that when the World Order changes, the cascading results and specific effects are often hard to predict, just as in the shift of tectonic plates. This is what we should remind ourselves as this financial crisis plays itself out. In the last 24 months since the sub-prime crisis broke, growth forecasts of all the major economic blocs have been on a downward spiral. Venerable financial houses, some a century old, have all fallen, precipitating a drastic loss of market confidence and inciting consumer gloom. Over just 9 days in Sep 2008, 3 financial giants (AIG, Freddie Mac and Fannie Mae) were nationalised, one became bankrupt (Lehman Brothers) and one was sold (Merrill Lynch). A week later, Goldman Sachs and Morgan Stanley became bank holding companies, marking the end of the era of investment banks. Aggregate demand has slumped and this has resurrected Keynesian orthodoxy as Governments all around the world have announced bail-out plans and stimulus packages. For many, the build-up of public debt and the inflationary aftermath that is bound to come are a given, but are considered a lesser evil for tomorrow, to solve today’s woes. From the heady days just barely a year ago when the free-for-all market capitalism was the operating mode in the US and Europe, it has now veered to the other extreme where nationalisation of key banks and institutions is seriously considered by many experts as being a case of not “if” but “when”.
This global crisis therefore confronts all of us and warrants a decisive response. How we should collectively as one country, or individually, respond to these World changing events must surely be the topmost question on all minds. How can Singapore position itself, so that in the aftermath, we will emerge not only intact but ahead of the pack? What assumptions for our economic and social well-being remain valid, and which others have been rendered irrelevant? What will the changed World look like as pole positions for both countries and strategic resources get re-shuffled? In responding, what strategies must we intensify or discard? The answers to these important questions will decide the place of Singapore in the New World Order.
A Tale Of Two Cities
In divining the tea leaves, we draw lessons from history that teach us how small city states are particularly vulnerable to changes in the world order. Many have declined or faded away when they did not wake up to change or rise to the challenge.
Venice is a prime example. In the past, it flourished because of its strategic position on the overland trading routes between Western Europe and the East. From the 9th century, it grew in influence and by the 13th century, had eclipsed the Byzantine Empire to its East. However, Venice’s fortunes began to change when Constantinople, Byzantine’s capital, fell to the Ottoman Empire in 1453, closing off many of the trading routes to India. But even before that, the importance of city-states itself was already threatened with the consolidation of powers in Europe, as countries became unified under dynasties. Venice was unable to hold the tide against a unified Spain and Portugal as maritime trading powers. The discovery of new sea routes to India and to the New World accelerated Venice’s decline. We visit Venice today, not as a pre-eminent city of the present but for its rich history and bygone glories.
In contrast, Boston provides an example of a city that has continued to adapt and flourish. The caveat is, of course, that it has the US as a large and powerful hinterland. But with a population of about 600,000, it still offers lessons on how it has successfully reinvented itself at least 3 times in its 400 year history. Boston was a maritime hub and international trading port in the 17th and 18th century due to its prime location and seafaring tradition. When the Napoleonic Wars disrupted maritime trade in the 1800s, the Boston merchants were entrepreneurial enough to divert their capital into manufacturing and the city became one of the US’ largest manufacturing centres into the early 1900s. Subsequently, it transformed itself into a high-tech service-based economy that continues to be successful. It is also a magnet for talent, being home to 36 universities and colleges in metropolitan Boston and its surroundings.
Singapore’s Response
How then should Singapore respond and prepare itself as a result of this global financial crisis? We must re-evaluate our strategic priorities and if need be, re-order them or chart new directions. Certain fundamentals remain. The basic elements which supported our past decades of high growth remain intact and sound. We have consistently invested in education to build a skilled, highly motivated work force. We have a robust and transparent regulatory regime underpinned by a respected legal and judicial framework. Our socio-political stability, coupled with a tripartite pro-business environment, has attracted many of the top MNCs to base their regional headquarters here. Most strategically, we have large reserves as a result of our fiscal prudence over the past few decades. As Minister Mentor Lee said last week, “we have saved for a rainy day and the rains have come.” Singapore’s reserves provide us the flexibility and resources to successfully cope with the financial crisis. This is a strategic asset because while others must borrow to fund their stimulus packages, Singapore need not but instead can draw from its current and past reserves. We should not now abandon fiscal prudence to face this crisis, but use our reserves to build strategic capabilities that will pay rich dividends over the medium and longer term.
As the term for crisis in Mandarin “wei ji” sums up, in every danger, “Wei”, opportunities abound, “Ji”. There will be a re-shuffling of the deck and those that are able to capitalise on the opportunities will emerge as key actors while others who adopt a “business-as-usual” mindset will fall behind.
Despite the downturn, we will continue to build on these fundamentals to educate and train Singaporeans. We must maintain our investments in high value-added industries and enterprises. Petro-chemicals, the biomedical sector, precision engineering, tourism, clean technology, creative and digital media industries are still growth areas to focus on. We must continue to maintain spending on research and development because in this downturn, our comparative advantage has improved over our competitors. We have committed to R&D spending as 3% of GDP to match developed economies. We should step up efforts to promote entrepreneurship to take advantage of opportunities. Singapore has set aside $660M to assist companies to seek new markets and growth opportunities, and to build up their capabilities to produce products and services to meet those opportunities. IE Singapore will also enhance internationalisation and export-promotion activities.
Nevertheless, we must also recognise that the operating environment has changed, and in some areas irrevocably. I am confident that the US economy will recover as they have a robust, resilient and vibrant people and business culture. The US will continue to be the dominant leader in economic and other spheres but the era of “high-spending” countries like the US providing World demand for “high-savings” countries like China is over, at least for the next decade or so. Prior to this financial crisis, the US accounted for more than a quarter of World trade. US domestic consumption accounted for between 65-75% of its GDP. In contrast, domestic consumption accounted for about 45-55% of China’s GDP. Its current account surpluses were ploughed back into US securities and assets that facilitated their borrowing and spending.
That cycle has been disrupted as a result of the global financial crisis. The demand bubble has burst and aggregate demand globally has slumped. This explains why trade figures are at record lows for export driven economies dependent on global demand like Japan, Korea, HK and Singapore; why ships and cranes lie idle all over the World, and freight rates are as low as $0.
The dominance of the G3 economies (US, EU and Japan) that has fuelled growth in Singapore and the rest of South East Asia is projected to diminish. Western Europe is in the midst of grappling with its own sub-prime crisis. Many of its banks financed large borrowings by Eastern European countries, which had eagerly embraced globalisation as they stepped out from behind the Iron Curtain and were in a hurry to develop their economies. For the US, UK and Europe, this model of high spending is no longer sustainable. President Obama has vowed to halve the budget deficit by 2013. In the words of Vikram Pundit, Citigroup’s CEO, US citizens also “get the new reality”. The US personal savings rate has jumped from almost nil just a year ago, to 3 percent now.
As a result, the relative size and position of markets and key players will be altered. The United States’ National Intelligence Council’s November 2008 “Global Trends 2025” report predicts that a global multi-polar world will emerge in the near future with the rise of China, India and others. In fact, the Economist had gone one step further and said that a multi-polar world may have already arrived .
The Global Trends 2025 report also projects that China will become the second largest economy in the near future. In December 2008, the Founder and Executive Chairman of the World Economic Forum, Prof. Klaus Schwab summed it up when he said that “China has become a global power whose cooperation is essential to re-launch global economic growth.” China will account for a larger proportion of global consumption and growth moving forward but predictions and hopes that China will now take up the slack left by US and Europe are unrealistic. Prior to the crisis, China accounted for only about 5% of World demand. Germany and Japan accounted for 6% and 10% respectively. The Chinese are inveterate savers and on current levels of consumption, it will take China some 30–40 years to grow to the level of US consumption today.
India is also growing its economic space in the world. Over the past five years, the Indian economy has grown on average over 8% per annum. The growth has been led by successful private sector enterprises like Infosys and Wipro which are household names in the business and IT community, and the Tata Group whose divisions span from making cars and running hotels, to power generation.
Resource-rich states will also gain prominence in the New World Order. Natural resources such as oil (energy), gas, minerals and commodities will continue to be in great demand as the world population becomes more urbanised. With oil prices now down sharply from July 2008’s 145 US dollars per barrel to today’s 47 dollars per barrel, some oil-rich states do face a deficit in their external accounts. But over the medium term, demand will rise for limited energy and resources. Therefore, the Petrodollar states in the Middle East and Gulf regions, and Russia should still be on our radar screens.
Singapore must exploit these new realities to attain a position of strength. We must leverage on our reliability, trustworthiness and stability as brands. From a systems approach, we have strengths in efficiency, high value-add and connectivity. As the World shifts, how do we entrench ourselves to be a relevant global player and play to our strengths? Rather than to employ a traditional sectoral approach (i.e. manufacturing, services, marine, construction) which has its limits, let me use a different model in broader conceptual terms which would be more useful for planning and strategic purposes. Increasingly, innovations and products require integrated capabilities and span sectors. For example, SMS, touch screen and Google Street View are not just manufactured products but require a deep appreciation of what humans feel more comfortable with. To help us mentally envision a greater role for Singapore in the post-crisis Order, I will use the image of cities that Singapore can aspire to - not one, but many types of cities. These cities overlap, expand our linkages, play to our strengths and extend our global reach. It is positioned as a growth city for the future.
A) Intellectual and Information City
Singapore must be known as a place for new discoveries and innovative value-add outputs. It should be a place of choice for those who want to exploit new technologies, solutions and services; protect their intellectual property; or store valuable information. We can be hosts to agencies that set quality standards for commodities and companies. As a measure of high standards, Singapore already has the most hospitals per land area which are accredited by the Joint Commission International. We can strive to be a centre where information dissemination is valued, because information from Singapore can be trusted and understood as it is packaged and presented well.
An intellectual hub builds on our branding as being efficient, trustworthy and having systems capability. This is why MNC HQs are located here; companies prefer to conclude legal transactions here; and regional research institutes are centralising their information networks here. Some examples illustrate. Singapore is not at high risk for earthquakes but last year the Earth Observatory of Singapore was set up at NTU to understand and address environmental threats such as tsunamis, earthquakes and climate change. It attracted one of the world’s top scientists in this area, Prof Kerry Sieh, not only because of Singapore’s geographical location close to the active Sumatran trench but because of our premium in intellectual capabilities. Similarly, because of the risk of global pandemics, the Regional Emerging Diseases Intervention Centre (or REDI) has been set up here. It collaborates with the World Health Organisation and the US Centres for Disease Control and Prevention to monitor and respond to disease threats in the region, leveraging on our well-established IT networks and systems. Singapore has also become a broadcast hub. CNBC Asia, ESPN Star Sports, Discovery Channel, MTV and Disney are among the global names that are headquartered here. Lucasfilm Animation and British special effects firm Double Negative are big-name production houses that have come to Singapore. Our position as a regional content deliverer has been further strengthened by the establishment of Thomson Technicolor’s digital cinema hub and network operations centre. Singapore’s strong branding also benefits home-grown companies. For example, in the media arena, local production houses such as IFS, Oak3 Films and Ochre Pictures signed an agreement last year to work with US-based FremantleMedia Enterprises. We can build on our initial successes to become an intellectual and information Mecca.
B) A Talent City and Global Node
In the next decade, it is likely that growth across regions will be more uneven, i.e. some regions will grow faster than others, basically because demand for capital will increase to finance debt and resources captured where it is better utilised. The largesse to fund less deserving projects and geographic areas will diminish. Similarly, talent which is mobile will follow and congregate in growth regions. Uneven growth of nodes or mega-regions was already occurring but will be likely accentuated. Richard Florida encapsulated the idea that “creativity has become the principal driving force in the growth and development of cities, regions, and nations” (Cities and The Creative Class). We must build a city which provides that environment to bring the full potential of Singaporeans as well as one that is a magnet for talent to produce a highly skilled, creative, innovative and entrepreneurial work force. Our people need to have deep knowledge, and yet be flexible to navigate across disciplines and fields, finding new ways of doing things. We can train these skill sets through formative experiences in school and university.
We are progressing well in our plans to establish Singapore as a talent city. Our local universities are going from strength to strength, and are already well-regarded internationally. SMU’s graduates are well-liked by industry for their confidence, initiative and street-smarts. Singapore’s strong support for academic research is also helping our universities to become thought-leaders and knowledge generators. To further expand the higher education landscape in Singapore, we have attracted top brand names such as INSEAD and New York University’s Tisch School of the Arts here under the Economic Development Board’s Global Schoolhouse Initiative. In private education, MOE is also working to raise the standards of private education providers to help achieve Singapore’s goal to be a regional talent magnet. Beyond education, Singapore’s R&D efforts are attracting world-class researchers to Singapore to our Campus for Research Excellence And Technological Enterprise (CREATE), Fusionopolis and Biopolis through our comprehensive national support for research.
However, Singapore can amplify our results by working with our geographic neighbours to become a node in the global network of fast growing regions. This was why the Integrated Sourcing Initiative clause was introduced in our FTA with the US, where over a hundred types of goods made in the region enjoy similar tariff concessions, as long as they are exported to the US through Singapore. Singapore has worked with Indonesia to help develop special economic zones in the Riau Islands of Bintan, Batam and Karimun, on areas such as investment promotion, taxation, immigration, and vocational training and help facilitate private sector investments. On the education front, Singapore has provided Batam Polytechnic with consultancy to help set up vocational programmes, starting with a course in mechatronics to produce skilled operators to upskill local industries. There is also scope for synergistic co-operation with Malaysia, especially of the Southern states like Johor Bahru, our proximate neighbours.
But the key to retaining and attracting talent, whether for a city or mega-region, is Opportunities and Lifestyle. Recently, it was reported that high net-worth individuals were re-locating themselves or their families out of Hong Kong because they did not like the air quality. For Singapore, clean air, pure water, safe streets are a must have. But we will need more living space in parks, recreation, entertainment and cultural areas to accommodate the rising aspirations of Singaporeans and overseas talent. We should recognise that other global cities and regions are also competing for Singaporeans and global talent. Cities like London, San Francisco and New York are already established and will retain their attraction even in the midst of this downturn. But in Asia, the competition is also increasing. Last year, Singapore was ranked as the best place in the world for Asians to live. However, Sydney, Melbourne, Kobe, Hong Kong, Taipei and Shanghai are not far behind. They can draw others and even Singaporeans away if we do not keep up improving our city.
C) Future Model City
I mean this in the broader sense where ideas and state-of-the-art technologies are translated into sustainable and operating systems for cities. We can do this because of our proven ability to integrate different components into cost-effective solutions. We have already accomplished it for water, by combining our NEWater and Deep Tunnel Sewerage System projects to close the water loop. We are at the leading edge in areas like e-Government, Urban Housing and Traffic Congestion Control. We should build on our track record and continue to be a centre for cutting edge technology. For example, Norway’s Renewable Energy Corporation is investing 6.3 billion Singapore dollars to build the world’s largest solar plant here. It joins companies such as Rolls-Royce and Neste Oil in choosing Singapore as the location to develop tomorrow’s energy solutions, including fuel cell technology and sustainable diesel. Renewable energy is the wave of the future and we must continue to attract more of such companies to come here. Singapore can be a place where people come to look for a better and sustainable future. We can export our well-proven models in education, environment, public housing, and water and waste management, to countries with large emerging middle classes, especially in a rising Asia. A study by Indian academic Surjit Bhalla found that the size of the global middle class had risen from one-third of the world’s population in 1990 to over half in 2006. The World Bank projects that this middle class will double in number between now and 2030. The growing middle class in China and India will demand better standards of living. There will be opportunities for more of our companies and citizens to exploit our know-how to new centres of growth.
D) Connectivity City
Our airports, sea ports and SIA have been and will continue to be key assets. But this idea of a city that connects goes beyond this, Singapore has developed a quality brand and a “synthesis premium”. We can connect different people, regions, systems and ideas to produce quality and sustainable solutions because of our unique understanding of East and West. Others are now looking to learn from our expertise. Construction has just begun on the Tianjin Eco-city, where Singapore is sharing our experience on town planning, waste disposal, and environmental control.
Our ability to understand East and West is an asset and a product of our migrant population with different races and bilingual policy. We start this global exposure early for our students. MOE has established the Internationalisation Fund in Jan 2008 to enable schools to send at least a third of Singaporean secondary and junior college students for an overseas immersion. SMU also sends its students overseas and provides about 14% of its students with at least 1 overseas exposure during the course of their undergraduate education. For example, your recent Business Study Missions to the United Arab Emirates have certainly given your students excellent exposure to a fast developing and dynamic region. NUS and NTU are also sending increasing numbers of students overseas to gain a global perspective.
We should also expand the opportunities for groups of Singaporeans to learn different languages - this will help us service the World. The Singapore Centre for Chinese Language will be up and running by mid 2009 and will help us take another step towards achieving that goal. We must also have capabilities to understand the cultures of ASEAN, China, India and the Arab Nations. Singapore proposed the Asia-Middle East Dialogue and hosts the Asia-Europe Foundation which serve to promote cross-cultural understanding and collaboration.
Role Of SMU And Its Students
How can SMU and its students play a role in the remaking of Singapore in the post-crisis World? SMU has done well, not only in helping its students in mastering domain knowledge, but also in developing skills of adaptability and the attitude of resilience. For the next few years, job opportunities in the financial sector will be dampened. SMU graduates must adapt to the current conditions. However, the economy will recover and those that prepare now for that upturn will do well.
SMU must groom its students to be potential leaders in society - whether in the public, private or people sectors. Leaders who possess the right values of integrity, community before self, and loyalty to the country. SMU’s undergraduates are no strangers to community service. SMU has a strong reputation for nurturing not just minds, but also hearts, through its emphasis on character and leadership education. Co-curricular and student activities, such as your Community Leadership Programme, are part and parcel of being an SMU student. SMU also has a strong tradition of alumni giving back to the institution, and this is a strong signal to those outside of SMU, of how its students are practicing community before self.
A Test For This Generation
Let me conclude. Prior to this global financial crisis, I had actually thought it possible that the Post-War “baby boomers”, Gen X and Y, might escape facing any major calamity in their lifetime. The founding generation were not as fortunate and had lived through a tumultuous era that saw colonialisation, World War II, communist insurgency, merger and separation, Singapore’s independence and communalism before they enjoyed the fruit of their struggle.
No one can reliably predict how long this recession will last or the ramifications after the Crisis. But if this recession is prolonged, it will represent the litmus test for this generation - yours and mine. If so, we will be tested, even severely. But we have much more resources now to face any crisis when compared to the Singapore in the 1960s, with a GNP per capita of US$320, poor infrastructure, little capital and a handful of low-end industries. How we will emerge, will depend on our commitment to stay the course together. I am optimistic that Singaporeans as one people have the wherewithal to fight the odds to forge a stronger and better Singapore. We will succeed.