Disruption the 'defining challenge' for Singapore economy

Home-grown firm Hope Technik (left) beat top engineering companies from around the world to win a tender from aircraft giant Airbus to build a scale model of a space plane for Airbus' civilian spacecraft programme. Logistics firm Ascent Solutions, an
Home-grown firm Hope Technik (above) beat top engineering companies from around the world to win a tender from aircraft giant Airbus to build a scale model of a space plane for Airbus' civilian spacecraft programme. Logistics firm Ascent Solutions, another local business, developed a container tracking device called iSpot, which allows round-the-clock monitoring, prevents theft and speeds up the customs clearance process.PHOTOS: MINISTRY OF COMMUNICATIONS AND INFORMATION

S'pore must keep up with relentless pace of technological change or risk being left behind

Five minutes into his National Day Rally speech, Prime Minister Lee Hsien Loong asked how many members of the audience arrived at the venue by Uber and Grab.

Several people put their hands up but certainly more than when Mr Lee asked who came to the rally by taxi. "Our taxi drivers must be getting worried," he said.

It is such disruption that will become the defining challenge for Singapore's economy, said PM Lee yesterday. He was delivering his National Day Rally speech at ITE College Central in Ang Mo Kio.

The country is dealing with a host of economic issues, such as slower growth and the need to help people upgrade their skills. But chief among them is the relentless pace of technological change sweeping many industries. What is key, said Mr Lee, is how Singapore chooses to respond - close itself off, or embrace the change and help incumbents adjust.

Mr Lee said Singapore must opt to embrace change, and it needs "an overall strategy" that will help firms move into this digital space, support entrepreneurs in coming up with innovative ideas, and help workers gain new skills.

CONSTANT CHANGE

Things are changing fast, old models are not working, new models are coming thick and fast and we are having to adjust and to keep up. Because of technology, globalisation, the disruption will happen over and over again, relentlessly.

PM LEE

The Committee on the Future Economy (CFE) - a task force formed to retool Singapore for the future - is working on this. "Maybe the next Google or Facebook or Alibaba may come from Singapore," said Mr Lee.

In dwelling on the economy - traditionally the subject that gets the foremost mention in his English National Day Rally speech, Mr Lee had his eye fixed firmly on the future.

He noted that economic growth has slowed this year - the labour market has cooled, unemployment is inching upwards and business has stagnated for many companies.

The rapid pace of growth that Singapore experienced in previous decades is no longer sustainable as the economy has matured.

And even as growth slows, technology is disrupting existing business models - not just in the taxi industry but across all sectors.

In retail, for instance, brick-and-mortar stores have been hit hard by the growing popularity of online shopping. In Orchard Road, for instance, shops have become places where people "look, see, go home to buy", said Mr Lee.

People can even order joss paper and incense online for the ongoing Hungry Ghost Festival, he said in his Mandarin speech.

Neighbourhood coffee shops are also facing new competition from the likes of VendCafe, a cluster of vending machines serving hot meals and drinks in Sengkang.

These disruptions are the "new normal" and companies big and small need to adapt in order to thrive, he said.

Still, it is not all bad. Mr Lee said companies in sectors such as general manufacturing, furniture design and food have transformed and expanded overseas.

New jobs have also been created.

The growth of e-commerce means rising demand for logistics services, which Singapore has an edge in, given its status as a transport and financial hub. There are also new opportunities in industries like data analytics and digital marketing, Mr Lee added.

"Every industry is disrupted but every industry is disrupted differently," he said, adding that government agencies will work with companies and trade associations to tailor programmes, invest in technologies and develop skills.

Mr Lee gave a preview of the work CFE is doing to help the country prepare for the uncertainties ahead.

First, the Government will continue helping companies build new capabilities in areas such as the digital space. Singapore is well placed to capitalise on opportunities in it, he said. Flashing a photo of a group of people gathered at a playground staring at their smartphones, Mr Lee asked: "Where do you think this is, and what do you think they are doing?

"That's Pokemon Go! Pokemon Go has gone viral... It shows that everybody has a phone, everybody is online, everybody is comfortable, able to use digital."

Some businesses, such as logistics firm Ascent Solutions, are already making progress, he said. The firm developed a container tracking device called iSpot, which allows round-the-clock monitoring, prevents theft and speeds up the customs clearance process.

It took the device to East Africa, with support from trade agency IE Singapore, and there are now 10,000 iSpots in Kenya and Tanzania. It used to take 20 days for a container to travel from Kenya to Uganda, but iSpot has helped cut this down to two days.

Besides digital, Singapore also needs to build deep capabilities in other sectors and help its small and medium-sized enterprises (SME) compete with the best in the world, said PM Lee. For instance, Singapore is holding its own in the engineering sector and home-grown SMEs like Hope Technik are flying the flag abroad.

The firm beat top engineering companies from around the world to win a tender from aircraft giant Airbus four years ago to build a scale model of a space plane for Airbus' civilian spacecraft programme.

"So, maybe in 20 years' time, when civilians go into space and space flight is a reality for all of us, then we can say a Singaporean firm helped this to happen," said Mr Lee.

The Republic also has to continue promoting entrepreneurship. Besides creating jobs and prosperity, entrepreneurs give society the confidence "that anything is possible". Mr Lee said: "Through our own actions, we can change the world. And if we fail, we try again".

He cited how five years ago, Singapore started Block 71 in Ayer Rajah Crescent as a place where start-ups can incubate. It has been very successful and has expanded to include an offshoot in San Francisco.

"The start-ups are growing. Investors are paying attention."

Lastly, CFE is also working to develop workers' skills to prepare them for the new economy.

This starts with equipping students with cross-disciplinary skills, and extends to helping those who are already in the workforce to upgrade and deepen their skills. The Government is also helping retrenched workers transition into new careers, Mr Lee said.

"This is how we can progress together, and thrive in a competitive and dangerous world."

A version of this article appeared in the print edition of The Straits Times on August 22, 2016, with the headline 'Disruption the 'defining challenge' for economy'. Print Edition | Subscribe