UNCERTAIN EXTERNAL ENVIRONMENT

The United States and China are jockeying for position and advantage. The US is still stronger, especially militarily, but China is growing in power, influence and confidence.

Increasingly, the US has to accommodate China. If there is mutual distrust and rivalry between the two, it is but a small step from a trade disagreement to a wider and more serious quarrel. The US and China are far from going to war with each other, but it is not clear which way their relations will tilt.

If they tilt towards more conflict, it will be bad not only for the two powers, but for the rest of the world as well. That is obvious. But if relations tilt to the other extreme and the two powers agree to divide up the world between them, and set rules that only benefit them, that would be just as detrimental, especially for small countries which will have no say.

As a small and open country, Singapore will always be vulnerable to what happens around us. As Mr Lee Kuan Yew used to say: "when elephants fight, the grass suffers, but when elephants make love, the grass also suffers". Therefore, we must be aware of what is happening around us, and prepare ourselves for changes and surprises.

Close to home, Malaysia saw a historic change last week in its general election. Pakatan Harapan, led by Tun Dr Mahathir Mohamad, now forms the government. For the first time ever in Malaysia, the Umno-led Barisan Nasional lost power.

Indonesia is having elections too - local elections this year, and national elections next year.

Regardless of political cycles and election outcomes, we will work hard on relations with our two neighbours. Their success makes for a more peaceful and prosperous region, and this is good for us.

BUILDING A NATION OF OPPORTUNITIES

In the President's speech, she spoke about how Singapore must remain a nation of opportunities. This, to me, is the heart of our nation-building journey.

Nationally, this means growing our economy, creating new possibilities and expanding our horizons. Individually, it means improving the life of every Singaporean, in a fair, open and cohesive society.

One of the top priorities of the Government is therefore to keep the economy growing. We are in a strong position today, because our economy has grown steadily for the past 50 years and more.

Since independence in 1965, our gross domestic product has grown more than 40 times in real terms. Today our per capita income is higher than Japan's. We can see it in all our lives.

Now that we have become more developed, our growth forecast has moderated to 2 to 4 per cent. This has made some people anxious. They worry that their children will not have better lives than they themselves do today. But let us put the numbers in perspective.

First, 2 to 4 per cent is in fact quite good for a mature economy. South Korea and Taiwan are growing at around this rate too. Japan is growing even slower.

Second, 2 to 4 percent is just an estimate, based on our current stage of economic development. It is not the limit to our efforts or to our ambitions.

Individual companies and industries can certainly do better, especially if they come up with a more innovative product, or if they expand into new markets, and till virgin ground. We are pushing ahead with our economic upgrading. We can see the opportunities. The only question is whether we can seize them.

Take, for example, the digital economy. A lot is happening all around us. In Indonesia, the tech scene is vibrant, buzzing with energy and talent.

Indonesia has produced four unicorns. Unicorns are not animals; they are companies which are worth more than US$1 billion (S$1.3 billion). Indonesia has four of them - Go-Jek, Traveloka, Bukalapak and Tokopedia. Vietnam, Thailand and Malaysia have lively tech sectors too. If we can build up our own tech sector while connecting with theirs, we will prosper together.

We are making good progress also developing frontier technologies in artificial intelligence (AI), fintech, and advanced manufacturing. We have attracted leading AI researchers and companies to Singapore.

Nanyang Technological University (NTU) has built a reputation as a leading centre in AI. The Alibaba Group recently opened a research institute on AI together with NTU, which is its first research institute on AI outside China.

In fintech, the Monetary Authority of Singapore has developed Singapore to become a fintech hub, just in the last two or three years.In advanced manufacturing, the Agency for Science, Technology and Research is collaborating with multinational corporations, local companies and universities to develop new technologies in aerospace and precision engineering.These will create good manufacturing jobs. Small and medium-sized enterprises will benefit, and so will workers, because through these research collaborations they get access to the new technologies. So there are many possibilities for us to grow our economy, and to reinvent and redevelop Singapore.

SOCIAL MOBILITY

But growth alone is not enough. Individual Singaporeans must see progress in their lives, must feel that their future is bright, and must know that each one of us has our stake in it.

This means sharing growth widely and equitably, to improve the lives of all Singaporeans. It also means fully maximising the talents and efforts of our people, and getting the most capable and reliable people into the most consequential jobs, where they can make the most difference, and the greatest contributions. In other words, making sure there is social mobility, so that our meritocracy continues to work.

We want Singapore society to maintain an informal and egalitarian tone, where people interact freely and comfortably as equals, and there are no rigid class distinctions or barriers that keep good people down.

This is beyond the Government's ability to bring about alone. Society itself has to be open and permeable.

Any society that has been stable for a long time tends to stratify, and it become less socially mobile.

Singapore is still a young country of 50 years, and notions of class and hierarchy have not yet calcified. Social cues, markers and norms are still evolving. We do not want them to evolve in the wrong direction and contribute to class divisions and rigidities.

Social cues are important because they can become ways to pigeonhole or exclude others, knowingly or unknowingly. In Britain, your accent - the way you speak - can define your status in society... That is why Singapore schools put emphasis on teaching students to speak good English. Otherwise, those children whose parents already speak good English at home will be fine, but others will grow up at a permanent disadvantage.

Without everyone being proficient in English, Singlish will become a class marker.

SOCIAL MARKERS AND NETWORKS

There are other social markers that can signal and entrench class differences.

Members may recall the recent fuss over an unauthorised secondary school social studies guidebook. It contained a table that had sweeping generalisations about people from high and low socio-economic statuses (SES).

For instance, supposedly low SES speak Singlish, play soccer or basketball, and eat at hawker centres, while high SES speak formal English, play golf or tennis, and only eat at fine restaurants.

The story went viral. Many Singaporeans were appalled, and rightly so.

Lifestyle choices can indeed become separators in society, distinguishing marks. What you eat, how you dress, where you go for holidays, what games you play, what clubs you belong to. In every society, people have ways to show who is in, and who is out.

There are distinctions in Singapore society too, but the general tone in Singapore is one of restraint. If you wear a chunky gold watch and dress flashily, instead of being impressed, people may think you are a loan shark! That is as it should be. We must discourage people from flaunting their social advantages. We should frown upon those who go for ostentatious displays of wealth and status, or worse, look down on others less well off and privileged.

There is a further obstacle to social mobility: elite groups which become closed circles. Every society has its elite. They occupy the key leadership positions in society - in the government, in academia, in business, in professions, in politics. Members of the elite share similar backgrounds, interests and social spaces. They may be alumni of the same schools, they may have done business with one another, they may have worked in the same professions. They know one another, they have interacted with one another in different roles over long periods through their lives.

Such networks are natural structures in society. They are useful for people to know one another, to get things done informally, to share an implicit understanding of the interests of the society, and to feel a collective sense of responsibility for the society. Such networks are an important part of our social capital.

But social networks must always remain open and permeable. They must not close up, or form glass ceilings. It must not be difficult or impossible for others with talent or ability, but lacking the right backgrounds and connections, to be welcomed into the elite group, to rise to the top, to take their rightful place and make their full contribution.

If this happened, not only would social mobility be frustrated, but soon the elite group would start to only look after its own interests, and fail in its duty to lead and care for the rest of society. That would be disastrous for Singapore.

Let me share something (Education Minister) Ong Ye Kung told me recently. Raffles Institution (RI) is one of our most popular schools... It has a strong tradition of accepting students from diverse backgrounds, so long as they make the cut. But over the years, RI has become less diverse.

The new RI principal has been putting in effort, speaking to parents of potential students in primary schools across Singapore, to encourage them to apply to RI. To his surprise, some of the parents told him they did not want to send their child there. Why? Not because they thought their child could not cope with the academic demands, but because they feared he would not be able to fit in with other more well-off students.

Actually, I think this fear is unfounded because in reality, RI students still come from varied backgrounds. Just over half the students live in public housing, 53 per cent, and all the students get along confidently and comfortably. Bursaries and scholarships are readily available.

No parent needs to worry that he cannot afford to send his child to RI, or that his child will feel out of place. But if such a perception exists, and discourages promising students from applying to the school, it is not good for RI, it is not good for Singapore.

RI knows what it has to do to uphold its egalitarian tradition. The Ministry of Education will work with it, and other popular schools too, so that these schools never become self-perpetuating, closed circles.

We are doing many things to improve social mobility, but I have to be honest with you,there are no easy solutions.

Our strategy in Singapore has been more successful than most. With universal education, with home ownership, and the Government's determination to widen opportunities and make the most of every citizen, we have made meritocracy work in Singapore.

Now that our society is more settled, we must work harder to keep pathways open, and to level people up.

The Government is not ideological. We are pragmatic. We will try anything which works. We will learn from our own experience, and the experience of others. But we must also be realistic. Spot what looks promising, but please also recognise what will not work.

Some have suggested... a universal basic income, which is a neat idea, so far unproven anywhere in the world. The Finns tried it and aborted the experiment early. It didn't work for them. Others want to abolish the PSLE. That is very hard to do. Educators have very different views, and even parents have very different views...We are taking the first step to change the status quo, by doing away with T-scores. If anyone can come up with a better alternative, we will certainly consider it.

SOCIAL COHESION

Meritocracy is about individuals having opportunities and being successful. But we must also be successful together, as one people, one society, and one nation, not just successful alone but successful together.

What holds us together is not our pink NRICs, but the shared experiences that we build together over time. We grow up together in national schools, and we are comfortable around each other, regardless of our family backgrounds. We go through national service, building brotherhood and camaraderie when we march and fight together.

We eat at hawker centres, regardless of whether we are rich or poor...We live in Housing Board estates. We learn the habits and preferences of different races and religions, and we help neighbours out when they are in need. We travel together on public transport. And unlike in some other countries, there is no social stigma to living in public housing, or taking the bus or the train.

But nation building will always be a work in progress, because the forces that pull Singaporeans in different directions never go away. Race, language and religion are enduring fault lines. From the start, we knew that they could divide and destroy us.

Today, our social cohesion has grown stronger, but these tidal pulls have grown stronger too.

Take, for example, the influence of China and India on our own ethnic groups...These are two vast nations, even civilisations. They are growing in strength and confidence. It will be a very long time before we become immune to their ethnic, cultural or economic pulls.

Furthermore, the relationship is complicated, because on the one hand, we want to maintain our separate identity as a multiracial, sovereign and independent country. But on the other hand,we want to say, we speak Mandarin, we have overseas Indians, we have ethnic links, we have cultural ties, we have an inside track. So between the two, there is tension and we have to keep that balance and maintain our position and our cohesion.

Likewise, with the Malays. Over time, a Singaporean-Malay identity has emerged clearly. But it still overlaps with the Malays in Malaysia, both in terms of race and religion. And the call for a global ummah... has a powerful appeal.

Furthermore, we are exposed, in this Internet age, to extremist and exclusivist teachings. These can lead individuals astray, and if there is a terrorist attack, it will cause great fear and distrust between Muslims and other Singaporeans.

BUILDING BRIDGES WITH NEW GROUPS

Beyond race, language and religion, we must work at building bridges between different groups in society. The labour movement is one institution vital to our social cohesion. Because of the tripartite partnership, labour management relations are a source of strength for us.

But in the new economy, fewer workers are doing jobs traditionally covered by the trade unions. Many more are freelancers and professionals. If these new groups are left out... it would weaken tripartism and our social compact.

So it is better for the labour movement to embrace them, to adopt their concerns, to become more inclusive.

4G leaders' hearts in the right place

Another bridge we need to build is to our new citizens. Immigrants are part and parcel of our history and identity. And if you look ahead, we need a steady flow of immigrants, not too many and not too few, to top up our population.

The new arrivals have chosen to make Singapore their home, and they will contribute to our country and society. They have to make every effort to mix and interact with everyone else. On our part, we should welcome them, we should support them in their journey to becoming Singaporeans, as others have helped us and our forefathers.

CONSTRUCTIVE POLITICS, GOOD LEADERSHIP

Can the next generation of leaders build on our shared experience of 50 years, and maintain the sense of collective mission?

Can they work to improve the lives of all Singaporeans, and not the interests of narrow groups, so that they pass on an even stronger, more united Singapore? I think they can.

The fourth-generation (4G) team is now in place. They are overseeing their own portfolios and projects, explaining their ideas to Singaporeans, implementing policies and making them work.

It is a strong team of able men and women, with a balanced combination of skills and strengths. They are gaining experience, willing to serve, and most importantly, their hearts are in the right place.

We need new leaders for each generation, from each generation. Because each generation has its own challenges to tackle, and tough choices to make. The electorate will be different, the economic landscape will be different, the international order may well also be different.

Some hard truths will always remain for Singapore. But even old problems may need new solutions. We must be pragmatic and non-ideological in our approach.

Keep an open mind, and make decisions with both the head and the heart.

Remember our history but don't be trapped by it.

That is why leadership renewal is crucial: new ideas, new bonds and new connections are needed with every new generation.

As an opposition party, the Workers' Party plays a role in our political system, whoever is their party leader. Opposition parties keep Singapore politics contestable. In other words, the PAP does not have a monopoly of power, does not have the right to rule Singapore indefinitely.

So long as the PAP government performs, it keeps the voters' support, it stays in power and the opposition cannot gain ground.

But if the PAP government becomes incompetent or corrupt, then of course the opposition will grow.

Political parties do not have a fixed lifespan - a time to live and a time to die, as Ecclesiastes puts it. How long a political party continues in government - or in opposition for that matter, because parties come and go in the opposition too - depends on whether it can renew itself, continue to serve the people, continue to bring progress to the nation.

If the PAP can keep on successfully doing that, we can stay in government. But if we ever fail, we deserve to lose.

So my message to all PAP MPs is, "work hard, serve the people, hold the ground, and win elections".

This does not mean the Government will shy away from difficult problems.

A government must govern. And if ministers are not prepared to govern, then give it up.

Governing means, from time to time, you have to do difficult things, when they become necessary. Leadership means you have to explain, persuade, and convince people that you know what you are doing, and you are doing it for good reason, and that it is the right thing to do. That is the way to maintain people's trust, and trust is critical.

Without trust, the government can't govern. It won't dare to do painful but necessary things. Politics becomes the art of pandering - a bidding war between parties, who can give more, who can offer more.

You say you can reduce the tax, I say I can abolish the tax. And you say I can give you a hongbao on top of that. And how to pay - we can think of that after the elections. And the country goes downhill.

The 4G ministers understand this. They have been working together, learning to complement one another's strengths and weaknesses, making decisions as a team, and taking collective responsibility for these decisions.

To me, this working together is just as important, if not more important, than the question of who should be the next prime minister. Because for the next PM, I know there is more than one qualified candidate.

We are fortunate that this is so, as it provides strength and depth to the team.

Now it is about the team coming to a consensus on the best option. But to work together as one team, there is no other option.

Whoever becomes the next PM, the team has to work closely together for him to succeed. If they cannot or do not do so, the next PM will fail, whoever he is.

Even in the best of times... Mr Lee Kuan Yew did not run the country by himself. Neither did Mr Goh Chok Tong, nor myself.

When Mr Lee received the Freedom of the City of London in 1982... he said: "I feel like a conductor at a concert bowing to applause, but unable to turn around and invite the accomplished musicians in his orchestra to rise and receive the ovation for the music they have played. For running a government is not unlike running an orchestra, and no prime minister ever achieves much without an able team of players".

I think I can speak for Mr Goh Chok Tong when I say that we both feel the same way.

I know everyone is anxious to know who the next PM will be. Well, the leader must command the respect and loyalty of his whole team. He must enjoy the support and confidence of the broad mass of Singaporeans. These things take time; they cannot be forced. I do not believe we are ready to settle on a choice yet. Nor is it helpful to treat this either as a horse race, or a campaign to lobby support for one or the other candidate. This is a team game. We want a strong, cohesive team so that Team Singapore is the winner.

I am confident that in the fullness of time we will see a clear outcome, and a leader emerge from the process.

Certainly I expect this to happen before the next general election.

For these 14 years as PM, I have been working with the 4G team, guiding them, assessing them, preparing them to take over the reins.

When (Finance Minister) Heng Swee Keat rounded up the Budget debate this year, I was happy to hear him describe the Budget as one that not only meets the needs of today's generation, but also accounts for the needs of future generations.

It showed that the 4G ministers understood that their deepest responsibility is to be a steward of Singapore.

The Government is certainly not the owner of Singapore, but neither is it just the manager of Singapore. It is the steward, it's responsible for taking good care of the country, for holding it in trust, building it up and handing it in due time to future generations.

I am confident that when the time comes for me to hand over to a new prime minister, Singapore will be in the hands of good stewards.

We have built something truly special here in Singapore. Countries near and far look to Singapore as a model of governance and development. People want to live here, do business here. Even the US and the DPRK (Democratic People's Republic of Korea) are planning to hold their meeting here!

We are all living the Singapore Story, and keeping it alive. We must sustain and pass on this shared vision of prospering together, progressing together. That way, we will make this little red dot shine bright in the world, as well as in our hearts, for many, many years to come.