Mr Edward Yau, Secretary for Commerce and Economic Development
Mr Robert Ng, Chairman of the Singapore Chamber of Commerce (Hong Kong)
Ms Foo Teow Lee, Consul-General of Singapore in Hong Kong
Distinguished Guests
Ladies and Gentlemen
The Constants and Variables of the Singapore Formula
1. Good evening. Thank you for inviting me to dinner with esteemed members and guests of the Singapore Chamber of Commerce in Hong Kong. Today, I will talk about Singapore’s external environment and our domestic situation, and in each area, what factors remain constant, what are variable.
The External Environment
2. First, the external environment. There are some constants that explain Singapore’s existence and role in the world. Simply put, it is “Geography x (multiplied by) Connectivity”.
3. Singapore is connected to the world by virtue of geography. We are a small city state right in the middle of Southeast Asia, which for centuries has been at the intersection of major trade routes. For hundreds of years, we have basked in the confluence of religions, cultures, ideas and trade from all directions. Today, almost half of the world’s annual total seaborne trade passes through the Straits of Malacca, where Singapore is situated.
4. Years ago, as a young trade negotiator for the US-Singapore Free Trade Agreement, I was briefed by the Port of Singapore Authority on how transshipment works in Singapore. A container ship arriving in Singapore will have its cargo offloaded to dozens of other ships heading to various parts of the world. The container will in turn be reloaded, with cargo consolidated from other ships.
5. Companies work the same way. Every international company that comes to Singapore brings with it a similar multiplicity of customers it serves, and the suppliers it engages. The logic similarly applies for the financial sector, for research and development, education and digital flows. Singapore is a city of multiplication. This is what we are and it will not change.
6. In this regard, ASEAN as a regional order is important. It is the centre of our foreign policy. The founding nations created ASEAN in 1967, so that smaller countries in the region could have a platform to work together for their collective interests, including against foreign interference at that time.
7. Today, as a region, ASEAN is of significant weight – a market of about 630 million people, of whom 60% are below 35 years old; a combined GDP that has exceeded US$2 trillion; with many regions of high growth and a rising middle class. Its digital economy is expected to grow to US$200 billion by 2025. As ASEAN Chair this year, one of Singapore’s priorities is to develop a Smart Cities Network across the region. We are linking up our ePayment networks within and outside the region, particularly India.
8. ASEAN also ensures that our regional architecture remains open and inclusive, so that we continue to serve as the thoroughfare and global commons for trade and investments. Extend that role further, and ASEAN serves as a neutral and objective platform for global powers to engage one another, to discuss and negotiate major regional and global issues of concern to them.
9. What then are the external variables? I would say the biggest shift of our lifetime, certainly mine, is the “Rise of China + Belt and Road”. The rise of China has shifted the centre of gravity of the global economy towards Asia. China’s rising weight will change the region and the world as we know it.
10. China’s change is brought about by 40 years of liberalisation and reforms. It started with Mr Deng Xiaoping’s pivotal speech at the 3rd plenum of the 11th Communist Party Congress in 1978. Mr Deng had visited Singapore one month before he made the important speech, and had a dialogue with Mr Lee Kuan Yew. Two weeks ago, I heard President Xi Jinping speak at the Bo’ao Asia Forum, where he reaffirmed China’s commitment to further reform and opening up, and deepening engagement with the global economy.
11. China is well on its way towards realising its first centenary goal of building “a moderately prosperous society in all respects” (“全面建成小康社会”), and marching steadily towards its second centenary goal of building “a modern socialist power that is prosperous, strong, democratic, culturally advanced and harmonious” (“建成富强、民主、文明、和谐的社会主义现代化强国”).
12. So long as China continues on this path, driven by its own aspirations, Singapore can be a valuable partner. We are a microcosm of the world and of China as it continues to open up. For 40 years, Singapore’s experiences in market-based development, the challenges we faced, the contradictions we had to wrestle with, and the policies we adopted to tackle various issues, have been useful references for China.
13. Today the form and substance of this collaboration will have to change, because we live in a different era. And indeed our partnership has been progressing with the times. This is best reflected in our three Government-to-Government projects. The Suzhou Industrial Park facilitated China’s early industrialisation efforts in the 1990s. The Tianjin Eco-City supported China’s sustainable development agenda in the 2000s.
14. The third and latest project – the Chongqing Connectivity Initiative – is a priority demonstration project under the Belt and Road Initiative (BRI). Punching through Chongqing to the Beibu Gulf, the Southern Transport Corridor connects the belt and the road, making it cheaper and faster to move goods between Asia and Europe.
15. Singapore is an early and active supporter of the BRI, and you would have heard of 33/85. According to Chinese figures, under BRI, about one-third of China’s outbound investment and 85% of inbound investment to China goes through Singapore. Through infrastructure financing and training of officials, Singapore is also working with China to deepen collaborations with third countries onboard the BRI.
16. Our collaboration has therefore been progressing with the times. As long as China continues such developmental experiments and Singapore continues to innovate, there will always be scope for China and Singapore to learn and share insights with each other.
17. In the past, it was about removing tariffs, opening market access and building industrial parks and special economic zones. In the future, it can be about ensuring a clean and efficient public service, citizen engagement, conducting impactful research and development, or protecting intellectual property rights.
18. What China may be defensive about today, may become higher standards it wants to promote tomorrow. When I visited Beijing with PM Lee recently, a Chinese Minister told me that other countries can pass off mediocre tea as top quality Chinese tea, and that is not acceptable. In Europe, cheese and ham are protected by intellectual property rights, so there is no reason not to protect 大红袍. Likewise, in the near future, China will want to protect its intellectual property in artificial intelligence, digital technology and many other areas.
19. So in this fast changing world and era of transformation, the relevance of Singapore to China and to the world, depends on Singapore being a bellwether of emerging trends. It also means that we need to stay open and connect with as many countries as possible, so that we can feel more acutely the pulse of global trends. The closer we want to work with China, the more we need to collaborate with other countries.
20. Hence traditional markets like the US, EU and Japan remain important to us. The US is still the top foreign investor in Singapore. US companies are bringing in state-of-the-art know-how into Singapore. Technology companies like Google, Amazon and PayPal use Singapore as a test market for Southeast Asia. With Europe, we have concluded a Free Trade Agreement and are working towards ratification. Post Plaza-Accord, Japan, till today, has been a significant investor in Singapore.
21. Hong Kong has always been a good friend of Singapore. With the BRI and the development of the Greater Bay Area, there will be many mutually beneficial opportunities for Singapore, Hong Kong and Mainland China. The Greater Bay Area is the frontier for China’s next phase of development and its second centenary goal. I will be visiting Shenzhen from here, in my capacity as the Co-Chairman of the Singapore-Guangdong Collaboration Council. Hong Kong too has a similar engagement platform with Guangdong province, and there are opportunities to triangulate efforts and leverage the respective strengths and capabilities of our economies.
Domestic Situation
22. Let me now switch to Singapore’s domestic situation. Staying on the theme of constants versus variables, our domestic constant is: “Multi-racial country - (minus) hinterland and natural resources”. Mother Nature only gifted us the means of earning a living through our geographical location. She granted us neither resources nor breathtaking scenery to promote tourism.
23. But what we inherited through history is multiculturalism. It is in our DNA and embedded in the minds of every Singaporean. To me, it is our most precious gift and advantage as a nation. Because of it, Singapore has acquired a deep institutional belief to ensure that all ethnic groups in Singapore are respected, have full opportunities to chart their futures, and can practise their religions and cultures.
24. Inevitably, there are problems and challenges arising from diverse cultures sharing a home. From time to time, there will be calls for more honest and candid dialogues on sensitive inter-ethnic issues. This in itself reflects a high level of maturity. We do not realise how different we are until we live in another country. We are at this state perhaps because we are a nation of minorities; even the majority race in Singapore is a minority in our immediate region.
25. I would describe our variable as “economic strategy ÷ the cohesiveness of our society”.
26. Our economic strategy has been evolving rapidly in the last few years, from being primarily driven by manpower and foreign direct investments, to one driven by productivity and innovation, which in turns spurs entrepreneurship and enterprise. The recent Committee on the Future Economy further reinforces this strategy, and backs it up with more concrete initiatives and programmes.
27. A key aspect of this changing economic strategy is research and development. We are into our second five-year Research, Innovation and Enterprise plan, where we set aside S$19 billion to strengthen Singapore’s R&D capabilities and push the frontier of science and technology. What is more important than the investment is the patient capital. R&D takes time to produce tangible results, and it is starting to bear fruit.
28. We are attracting international technology companies to set up R&D laboratories in Singapore, including with our universities. Their discoveries will spin off into new start-ups or capabilities that will create employment, sharpen competitiveness and deepen their presence in Singapore.
29. Recently, Alibaba announced its establishment of a joint research institute with Singapore’s Nanyang Technological University, focusing on developing artificial intelligence applications in areas including healthcare, smart homes and urban transportation. This is the first joint research laboratory that Alibaba set up outside China. The AI applications developed would be tested on NTU’s campus, before being taken to market in Singapore, and across Southeast Asia.
30. I believe this is one area where Singapore, Mainland China and Hong Kong, can work together. Innovation is also one of the key thrusts of Hong Kong’s economic strategy. That is why for this visit to Hong Kong and Shenzhen, I am focusing on visiting universities, research institutes and technology companies.
31. By providing researchers the time, space and capital to explore new ideas and collaborate with various partners, we have sown the seeds of a start-up and enterprise ecosystem that is increasingly lively. Our status as a financial centre fertilises and nourishes the process. We also want to strengthen our linkages with ASEAN to make it our immediate hinterland. The incubators at NUS and NTU hothouse numerous deep technology start-ups which are spin-offs from our R&D efforts. Universities are becoming value-creating economic engines.
32. Instead of depending on manpower driven growth and attracting FDI, it is now about growth driven by research and innovation, productivity and enterprise, and taking it outside of Singapore. The education system that prepares students for the previous economic strategy will need to adjust to prepare them for this new economic strategy. Thus the education system is undergoing transformation, to better align with this new economic environment and trajectory. At the school level we are taking important steps to reduce the over-emphasis on academic grades. We are introducing outdoor learning, as well as applied learning early, and reviewing how national education should be delivered, for these inculcate values and critical soft skills that will serve our young well in adulthood.
33. In higher education, academic learning is giving way to a more experiential form of learning. It has become a norm for students to go on internships, do community service, and embark on overseas exchange or immersion programmes. Digital literacy is progressively becoming compulsory across the board for all students. In NUS, our music students have to learn computational thinking and quantitative analysis. We are transforming all Institutes of Higher Learning into centres for lifelong learning, so that they can keep up with the rapid advancement in knowledge and skills. The National University of Singapore has decided that enrolment should be for 20 years and not four years – a very bold but important move. The students graduate after four years, but they can come back to learn the latest technology or skills in their field.
34. I am confident that our economic strategy can succeed and we can create exciting opportunities for Singaporeans. What will curtail and limit our potential is social disunity. Every economic strategy is only as successful as it is inclusive. The great majority of Singaporeans must feel that growth benefits them and improves their lives. So while our starting points may be science, technology and digitalisation, the positive spin-off effects must percolate throughout all segments of society.
35. Our biggest worry today is inequality. Not just of income, which is inevitable in any open economy, but of maintaining the sense of mobility within society, and ensuring that families remain optimistic for the future. We also want to maintain that relaxed atmosphere in Singapore society where regardless of background, we interact and make friends with one another – eating in the same hawker centres, with our kids playing in the same neighbourhood playgrounds. Over the years, this has diminished as different groups retreat to their own social circle. This is one of the top pre-occupations amongst the younger Ministers in Singapore, which is to keep Singaporeans together.
Conclusion
36. In summary, life is full of constants and variables, and I have just provided a simplistic view of our current situation. We need to understand the depth of the constants, and work with the uncertainties and excitement of the variables.
37. Externally, Singapore will always be at the crossroads of a multiplicity of international connections. But we can do a lot more to ride the wave of a growing ASEAN, and a growing China, with the added boost of the BRI.
38. Domestically, multiculturalism is our constant and unique strength, but the lack of hinterland and natural resources is a permanent subtraction from our economic equation. Still, we will do well by constantly reinventing the ways to tap on external opportunities and to earn a good living. A divided society will be our greatest obstacle, so we must do our utmost to keep Singapore together.
39. I will be happy to take your questions.