SM Goh Chok Tong at the Dialogue With Singapore Polytechnic Graduates' Guild

“What is Singapore’s Future?”

What is Singapore’s future? This is a particularly timely question given that the General Election is around the corner. Indeed, all voters should ask themselves: how do we secure Singapore’s and our own future? I shall highlight 5 challenges and 7 strategies to secure our future. Of course, these are not exhaustive but they are meant to help frame the topic for our dialogue. What do I think are our key challenges?

First, our domestic limits to growth: finite land area; declining Total Fertility Rate (1.16); ageing workforce (median age of resident workforce increased from 38 to 41 over last 10 years. By 2020, the median age will be 40 - 44). Have we reached the limits of growth?

Second, our vulnerability to external events. As a small and open economy, we are price-takers, not price leaders. We are buffeted by uncertain geo-political developments and shocks to the international financial and economic system, e.g. political trends in South-east Asia; upheavals in the Middle East; and exposure to severe downturns in the major markets. Can we withstand geopolitical earthquakes and economic tsunamis?

Third, our ability to compete internationally. With the rise of China and India, amongst others, can we compete? Can we continue to make Singapore relevant to the region and the world?

Fourth, rising expectations of Singaporeans. Singaporeans expect the already high standard of living to keep on rising. A younger generation naturally worries whether they can do better than their parents. Can we meet their expectations? Or will they strive to do more for themselves and depend less on the government?

Fifth, political and social stability: We are preparing for another generational change in leadership. Will this proceed smoothly? Over the next 20 years, can we maintain our political stability, cohesiveness as a nation, social harmony, and solid tri-partite relations?

These are serious challenges. No doubt there are others which worry you which you can raise later.

Strategies for Singapore

I believe the answer to the question, “What is the future of Singapore” lies in us. I believe the future is what we make of it. We cannot wait passively for the future to arrive. We have to step up and actively meet it. I offer 7 strategies to secure Singapore’s future:

First, invest heavily in our people. We will continue to improve our strong education system at all levels, from pre-school to schools, ITE, polytechnics and universities. We will be expanding capacity at the poly level, and increasing university places. The Singapore Institute of Technology (SIT) was formed to allow polytechnic students to pursue degree studies locally. Over the next five years, MOE will spend $2 billion on ITE. Some of our ITE campuses today have better facilities than many overseas university campuses. We will develop an adaptable, highly educated workforce. We already have one of the best workforces in the world (Business Environment Risk Intelligence [BERI]). By 2030, the bulk of our workforce will have at least a polytechnic diploma, making it one of the most educated workforces in the world. We are spending more on continuous education and training for workers and Professional, Managers, Executives and Technicians (PMETs) to upgrade their skills to keep up with changing demands.

Second, position ourselves to take advantage of the many opportunities in growing Asia.The global economic center of gravity will continue to shift to Asia. China is expected to overtake the US as the world’s largest economy in 20 years time. It will be an upper middle-income country, with a per capita income of (US$13,000). India is expected to grow too, though at a lower rate than China’s. By 2050, their combined GDP will be more than one third that of global GDP as compared to one-quarter now. Asia’s growing urbanisation, infrastructure development and increasing demand for services will provide ample opportunities for Singaporeans. We have the skill-sets, know-how, products and reputation which they are looking for. As China and India develop, they will invest outside their own countries. Singapore must aim to be the natural destination for Foreign Direct Investment (FDI). Last year, we had more than $50 billion in FDI, which exceeded even the FDI into India! Our low tax rates, pro-business environment, educated and disciplined workforce and stable, clean and competent government, make us an ideal base for local, foreign, large Multi-National Companies (MNCs) and Small Medium Enterprises (SMEs) to take advantage of the opportunities in the region. We will also continue to support and invest in SMEs, and encourage them to tap regional markets. SMEs are an important pillar of the economy. They contribute to 60% of the GDP and employ every 7 out of 10 workers. We will commit $850 million in grants under the Enterprise Development Fund over the next 5 years which will help SMEs access capital, build capabilities, nurture talent and establish business networks. Other schemes are also available to help SMEs.

Third, we are restructuring our economy and improving productivity. Over the last 50 years, we have moved from a labour-intensive manufacturing hub to an innovative and highly-skilled economy. In the next phase, we aim to become an entrepreneurial and creative economy. We are determined to increase productivity by 2-3% a year. This year, we will double the National Productivity Fund to $2bil. Training support for PMETs will also be expanded.

Fourth, we will maintain high standards of leadership in politics, Civil Service, Armed Forces and Home Team departments. We are now preparing for a fourth-generation leadership to look after Singapore. Very few countries in the world do this. This leadership transition is even more crucial than previous transitions. The new leaders will lead a better educated and more questioning Singaporean population in a developed, prosperous city-nation. But most of the leaders would not have experienced first-hand our struggles for survival. Neither would the majority of the population. The Civil Service is broadening the intake into the Administrative Service, widening exposure of Administrative officers through postings to Statutory Boards, private sector companies and international organisations. It also invests heavily in staff training.

Fifth, we will continue to be open to international talent as that is a critical advantage. But we will do so judiciously to benefit Singaporeans. Although we have local talent in many fields, we do not have enough for us to compete internationally. We are only 3.2 million Singaporeans. Global companies are willing to invest in Singapore and create more jobs only if they are confident they can get the talent they need from Singapore or anywhere in the world. To take advantage of the opportunities in Asia and the world, we need international talent who can communicate in their own language and network globally. International talent brings new ideas and enhances the level of creativity.

Sixth, we will maintain our core values which are: a just and fair society, meritocracy, equal opportunities, integrity, multiracialism, being hardworking and prudent and self-relianceIndividually, they are not unique, but together, they set us apart from other societies. They are our competitive advantage.

Last but not least, we will create an inclusive society, with a Singaporean core, even if the income gap widens. In a free, market economy, not all Singaporeans will benefit equally from our growth. But all must enjoy the fruits of our collective effort to grow the economy. We will do more to build an inclusive society, where lower-income citizens can aspire to, and work towards a better life. The Government has always tried to ensure that the majority of Singaporeans enjoy the benefits of our economic growth e.g. this year’s “Grow and Share” budget (with more going to lower and middle-income families).

Our Future

Our combination of strengths and strategies has enabled us to achieve a virtuous Good governance-Growth-Stability Cycle: Good governance brings about growth; growth brings about social and political stability; stability enables us to plan for political succession, think and act long term and avoid short term populist policies. This has been our strongest competitive advantage over other countries. This virtuous cycle did not happen by chance. It was built up over 45 years. Once broken, it may take a long time to restart it. If international investors lose confidence in Singapore’s stability and business environment, it will be very hard to win them back. Then we may enter a no-growth – instability – weak government vicious cycle.

What will our future be? The last few weeks have shown how unpredictable the future can be. There were two black swan events: the uprising and turmoil in the Arab countries in North Africa and the Middle East; and the earthquake/tsunami/nuclear power plant crisis in Japan.

To navigate this unpredictable world, we need to have the best crew we can get, the competencies, the strategies, the unity, and the will to overcome crises. How successful we will be depends on how we respond to challenges and how we seize opportunities. If we adopt a passive approach, we will be like a man lost in the wilderness without a compass – we will end up walking in circles, going nowhere.

The 7 strategies I outlined will provide the power, GPS and radar for our ship. But most importantly, this ship needs a good crew and captain. Over the next 10 years, I am confident we will grow by 3-5% real GDP growth per year. This is a good growth rate for a mature economy. With 3-5% growth, we will generate about 50,000 jobs every year, twice the net number of Singaporean/PRs entering the labour force. About 15,000-20,000 high value-add jobs will be created per year. They will be in high-end manufacturing and modern services, like finance, business infocomm, arts and lifestyle businesses. We will grow real incomes by 30%. By 2020, Singapore’s per capita GDP will reach around US$55,000 from US$43,900 now, and we will be one of the top 10 richest countries in the world. All Singaporeans will benefit from this growth.

I believe that together we can create a bright future for Singapore. It will be a Singapore with a strong economy with good, sustainable growth and higher standard of living across the board; a well-integrated, cosmopolitan society with a lot of vigour, drive, creativity and ideas; a gracious and compassionate society where Singaporeans look out for each other and help those in need; and a united, stable country with a superb physical and social living environment.