We should never take for granted that Singapore's continued success and prosperity will be a given. The global environment has become more uncertain and our economy is facing challenges both in the short term and in the long term. To have the best chance to succeed, our workers and businesses will have to adapt quickly in a rapidly changing world. Our society is also ageing rapidly and our population numbers are not growing. This will present challenges for Singapore, both socially and economically. Let me first share about our external environment.
A COMPLEX AND CHALLENGING GLOBAL ENVIRONMENT
Our global environment has certainly become more complex and volatile. The US and China have not settled their trade issues and their long term strategic relationship. Uncertainty over Brexit remains and the risk of a hard Brexit has grown. The security environment is uncertain with potential conflicts between the US and North Korea and the US and Iran. The question is, how did the global environment change so quickly in recent times? Let me share two contributing factors.
• Globalisation and technology
The first has to do with globalisation and technology. Globalisation has created many opportunities for countries to grow and uplifted millions from poverty over the last few decades. Singapore has been a key beneficiary of this system but not every country has been successful in helping their businesses and workers make the necessary adjustments to keep pace with the rapidly changing world.
Many countries are struggling with high unemployment, especially amongst the youth, because they are not creating enough jobs for their own people. In many countries, the middle income groups and the middle class have seen their wages stagnating. The resulting resentment and unhappiness have divided their societies.
Fortunately for us in Singapore, middle class wages have continued to grow. Household incomes have risen faster than expenditure and our labour market remains strong with new opportunities constantly being created for our population, especially the young.
Hence in many countries, political divides are accentuated and instability has grown. Populist politicians narrow cast their messages just to win votes, but not to seek common ground or to bring their societies together to achieve things. Coalition governments have become incoherent and cannot govern properly. Those who feel left behind by globalisation are now asking themselves why they should continue to support this system. They want more protection for their individual or their group's interests and because of that, society fractures and societies are pulled apart.
It is not a healthy development.
Globalisation has improved the lives of millions of people. It makes more sense for countries to come together, trade together, integrate their production chains together rather than to isolate behind high walls of high tariffs. The benefits are not just economic. The more we integrate our production systems together, the more we share in each other's success. The greater our interdependencies, the lower the likelihood for nations to be in conflict with one another. That's because we have a vested interest in each other's success and that is why we do not need to practice beggar thy neighbour policies.
• Changing US-China relationship
Now the second factor that has changed significantly over the last few years has been the relationship between the US and China. The US increasingly views China as a strategic rival and there is unhappiness over China's trade practices, technology policies, market access policies, and so forth. China on the other hand sees the US as trying to curtail its development and its access to the global markets. It will take time, a long time, for both countries to adjust to each other and for the rest of us to adjust to their relationship.
The actions of the US and China will have a far reaching impact on all societies. It is unclear if both countries still believe that it is better for them to work together for a more integrated world. Major multinational corporations are already making adjustments to their supply chains and distribution networks as a result of these tensions. Even if the US and China resolve their issues, we cannot expect things to go back to where they were before the recent tensions came to the fore.
KEEPING A STRONG ECONOMY FOR ALL SINGAPOREANS
As an open economy that is heavily dependent on trade, Singapore cannot expect to be insulated from this challenging global environment. Our latest GDP figures reflect this. Second quarter advance GDP estimates showed that our economy grew by 0.1% on a year on year basis, slower than 1.1% in the previous quarter.
As I was preparing my speech, our downside risks have increased further with the resumption of the US-China tariff war, just announced when I was in Beijing, the trade spat between Japan and Korea and the ongoing situation in Hong Kong. The government is monitoring all these developments closely and we stand ready to support our citizens and businesses, in particular the most vulnerable, should conditions worsen.
To deliver the right medicine, we must also be clear about the causes of the illness. The current situation is unlike past crises. During the Asian Financial Crisis and the Global Financial Crisis, Singapore's economy experienced a sharp but short downturn triggered by a sudden loss of confidence in the global financial markets. The current situation is driven by weaker external demand and a deepening downturn in the global electronics cycle exacerbated in part by the uncertainties caused by the US-China trade conflict and the various other issues that I've mentioned.
All these have dented business and consumer confidence globally and the downturn in the electronics sector has spilled over to related sectors like precision engineering and wholesale trade. But having said that, we have seen these cycles before and we should not panic. There are still bright spots within our economy in infocomm, in professional services and so forth.
But what is complicating the current situation is that there are also long term structural changes taking place. These are the longer term shifts in the global supply chains and production patterns, a pull back from globalisation and erosion of the multilateral trading system, including institutions like the World Trade Organization. All these will take the global economy a much longer time to settle into a new equilibrium.
This means that our strategies to tackle the challenges of today cannot be the same as those we applied in the past during the Asian Financial Crisis or Global Financial Crisis.
We will adopt a targeted and long term perspective in our strategies, even as we factor the short term challenges posed by the external environment. Let me elaborate on these targeted and long term strategies to make sure that our economy can emerge even stronger from the short term challenges.
We must continue to uphold our fundamentals to navigate the current economic headwinds and create the longer term conditions for our success. We have a stable and pro-business environment based on the rule of law. And we are a safe harbour in a world of flux.
Our progressive regulatory environment promotes innovation and people from across the world trust our intellectual protection regime. We are well-connected to markets in the fast growing region of Asia and beyond. We have a skilled workforce and a stable tripartite relationship. But we are never complacent, we are constantly seeking to improve the skills of our workers, much more than before.
We must continue to strengthen these fundamentals. The most important fundamental is to never forget that our success depends on our ability to remain connected with the rest of the world be it in terms of air, land or sea links or increasingly in data, financial, talent, and technology links. These are the fundamentals that allow us to distinguish ourselves from the competition.
The more chaotic the world is, the more important these fundamentals are to us in distinguishing ourselves. These fundamentals are the reasons why we have been able to maintain our competitiveness and attract high quality investments for the long term. You have heard the recent announcements by ExxonMobil, GlaxoSmithKline, Neste, the two integrated resorts, Linde and so forth. Our investment pipeline remains strong, and we are confident that we can continue to be an attractive destination for high value and high tech investments that can continue to generate good opportunities for people.
TRANSFORMING SINGAPORE ECONOMY
Nevertheless, we must never be complacent. We must intensify our efforts to transform our economy in the following ways.
First, we must continue to diversify our markets, supply chains, and distribution networks. We must never, ever be held ransom by any single market or any single source. Recently I visited local company KH Roberts, a premium manufacturer of quality food flavours and specialty ingredients. It was founded 50 years ago in Singapore and the company has gone beyond Singapore to the Southeast Asian markets and beyond. It has also ventured into Asia and Europe. This is the same strategy that we adopt importing the food that we consume. Any of us who walk down the aisles of any NTUC Fairprice supermarket will know. When you look at the items, from eggs to vegetables, from fish to anything that we consume today, you will see that they don't all come from the same place but come from across the world. Because we must make sure that our supply chains are robust, especially in an increasingly fractious world.
Second, we must continue to work with like-minded countries to explore new areas of cooperation that can bring mutual benefits, such as the digital economy. We emphasise a lot on the digital economy because the digital economy will allow us to transcend our conventional constraints of geographical size and location. This is why Singapore is working closely with New Zealand and Chile to develop a pathfinder Digital Economic Partnership Agreement to deepen collaboration in the areas of e-payments, artificial intelligence and so forth. This will allow our Singapore companies to go beyond the Singapore market and connect with markets across the world.
Third, we must continue to create real value for ourselves through innovation, so that we can compete on the quality of our ideas, standards and trust rather than on price alone. The Jurong Innovation District is part of our ambition to become a hub for advanced manufacturing. It will enable companies to collaborate with researchers to develop new products that can push the boundaries of manufacturing.
Fourth, we will have to watch closely how the global supply chains and distribution networks shift as the world becomes more fractious.
No matter where they shift, we must seek to plug ourselves into the global trading system. We don't just wait for people to trade with us or trade through us. We are aiming for others to trade on our platform. This is why the PSA is not a port operator of Singapore. The PSA is a global logistics player across the entire globe with a string of ports around the world. When people trade on the PSA platform, they get access to global opportunities and not just those in Singapore.
We must also strengthen our efforts to renew our economy - transforming existing industries and developing new areas of growth in agritech, precision medicine, autonomous vehicles and smart mobility. Some of you were surprised to hear MTI announcing our ambition to develop ourselves as a significant food hub. Why is that so? We don't have the conventional land. But today, food production is not just about farms. Today, food production will meet the increasing need for proteins in a rapidly rising Asia. If we can do that with high tech, high density farming, precision farming, we will open a new vista for all of us. We can take a lead from the Netherlands. The Netherlands is not the biggest country in Europe but the Netherlands is known as the food basket of Europe because it produces that much food for the whole of Europe.
The new Agri-Food Innovation Park in Sungei Kadut will bring together high tech farming and R&D opportunities. So it's not just about producing food. We are also going upstream to combine our R&D development into genomics and into the science of food manufacturing which will allow us to stand out from the competition. Using a controlled environment, Sustenir, a start-up urban farming company has managed to grow strawberries locally on a commercial scale and will be expanding overseas to Hong Kong.
We are also helping more companies to scale up and penetrate markets beyond Singapore. This is the reason why we launched the Scale-up SG programme to help our local promising enterprises scale up beyond the Singapore market. So that if they are at a $10 million mark now, we want them to be at the $100-million-dollar mark. If they are at the $100-million-dollar mark, we want them to reach the $500-million-dollar mark, and so forth. Our job is to make sure that our companies continue to grow and create better jobs for our people.
But this is not all. For residents of Buona Vista, you will soon be seeing autonomous vehicles being tested on our roads, not in a test lab. We want to see whether we can be one of the forerunners in the globe, to integrate autonomous vehicles with conventional vehicles. And if we can do that, we will free up a lot of resources for us to do many other things and to deliver a better quality of life for all Singaporeans.
But building capabilities is not all about the big companies, it is also the small companies. One example is Hai Sia Seafood. A local seafood distributor with humble beginnings at Queenstown's Mei Ling Street, Hai Sia Seafood has utilised innovation to improve its business processes and increase productivity. The use of automation has helped the company to improve precision, increase capacity and achieve better hygiene and standards. These are the kinds of examples of what we can achieve when the government, businesses and workers work closely together for the next lap.
My fellow Singaporeans, we must avoid taking the easy way out and shirking our responsibilities to build a better future for the next generation. What we must do is to make sure that whatever measures we implement to help our businesses and our people are sustainable. Not short term measures just to artificially boost demand but instead, build real capabilities for us to compete on the global stage.
Our people must gear up for this global competition as well. This brings me to the next topic of why we are going to invest even more in our young, our middle aged, and our elderly, to unleash the potential of our people in a longer working life.
CONSTRUCTIVE POLITICS, COHESIVE SOCIETY
I have spoken much about the global uncertainties and the economy but let us pause for a moment.
What has allowed Singapore to stand out amongst the competition over the last 54 years? Is it because we have better ideas than people? Is it because we have more hardworking people than others? Not necessarily so.
All those are important. But one of the most important factors that has allowed us to achieve so much together over the last 50 years and more is that we have constructive politics and a coherent government.
Constructive politics is about bringing people with different aspirations, different capabilities and different concerns together to achieve results for themselves and for Singapore. Constructive politics is not about dividing ourselves against one another nor championing our respective personal agendas at the expense of the national agenda. For us to create more space for ourselves, we need to come together, even more than before in the last 50 years.
The greater our challenges externally, the more cohesive our society must be internally for us to be confident and to stand tall amongst the competition of nations. And this is how we have distinguished ourselves over the last 54 years -having a stable constructive political system, having a united people and working closely between government and people and between people and people. Let us continue to remember this, even as we face the challenges of tomorrow.
The hallmark of our political system is this. We have always been transparent and honest with our people on our challenges, opportunities, trade-offs and options. A responsible government must never shirk from its responsibility to share frankly and openly its challenges with its people, no matter how tough those conversations might be.
This is why we believe that in the next lap of our governance, it is not just about the government delivering for our people. It is the government delivering with our people. All of us must share the same sense of the challenges. All of us must understand the options and trade-offs that we have. And all of us must own the course of actions that we are about to undertake, together as one people. In a battle, we can go left or we can go right but we must all go together. That is the only way that we can succeed in overcoming our challenges.
We are an accountable government. Accountability means that we are not just accountable to this generation but to future generations. Being accountable means that we run a fiscally prudent system and not leave debts to our children to pay.
Today we have the privilege of enjoying more than $1 contribution for every $5 we spend in the Budget. We should thank our forefathers, and we should similarly pass on the same to our children and for future generations.
Being accountable also means that we do not just think short term but also long term. If climate change is going to threaten our shoreline and Tanjong Pagar, then we must make sure that we invest today, to make sure that our children will not be robbed of their homeland because of climate change.
Being accountable means that we build a system based on honesty, integrity, and incorruptibility. It means that we leave behind a better system for our children to enjoy. This is what it means to be transparent, what it means to be accountable. Being fair means that we allow each and every Singaporean child to have the best chance to succeed in life, and fulfil their potential, regardless of race, language, religion, ancestry, or connection.
We pride ourselves as a Singaporean society, standing tall and proud. Because in Singapore, so long as you are capable and committed, you need not fear that your family will not have the resources to support you. I stand before you as a testimony to this system and I am determined to make sure that every generation of Singaporeans will continue to enjoy this privilege to be called a Singaporean regardless of race, language, religion, ancestry or connection - as long as you are committed and capable, you will succeed. And in your success, we hope that you will contribute back to Singapore, just as generations before us have done so.
We pride ourselves as Singaporeans because all of us here never define our success by how well we do for ourselves, only how well we do for our families. Every generation defines our success by how well we allow and enable the next generation to do even better than us.
It is with such values in our DNA that we can look forward to SG100 with pride and confidence because we know that we owe it to ourselves to build a system that is transparent, accountable and fair. We owe it to our forefathers who have left us with so much that we will commit to leave behind even more and even better for the future generations.
We have been experiencing some problems with subscriber log-ins and apologise for the inconvenience caused. Until we resolve the issues, subscribers need not log in to access ST Digital articles. But a log-in is still required for our PDFs.