39.

One key development strategy is to make manufacturing and services the twin pillars of our economy. We already have a strong manufacturing sector, which has been the key locomotive of growth. EDB's Industry 21 Blueprint aims to further enhance our manufacturing capabilities, and diversify among and within our existing key manufacturing clusters of electronics, chemicals, engineering. This will maximise growth opportunities by leveraging on all possible linkages and complementarities among the clusters.

40.

At the same time, the EDB is continuously looking into the development of new, high growth emerging industries. Life sciences is one such example. Analysts have predicted that the 21st century will belong to biotechnology. With our established cluster of leading companies in pharmaceuticals, biotechnology and agri-biotechnology, coupled with our world-class healthcare facilities and institutions, Singapore is well positioned to become a major player in the life sciences.

41.

While our manufacturing sector is globally competitive, the same cannot be said of our services sector. One reason is that we have been slow in opening up our services sector to foreign competition.

42.

The productivity of our services sector has been significantly weaker than manufacturing. The gap has actually widened over the years. Between 1985-1992, the average annual productivity growth in the services sector was 0.4 percentage point below manufacturing. In 1992-1999, this gap has increased to 4.7 percentage points.

43.

In the new economy, services will play an increasingly important role. Goods will increasingly have a higher service content, as more goods are bundled with services to form an integrated product package. In any case, the line between goods and services is blurring. The logistics industry, for instance, has evolved from just providing transportation and warehousing to delivering value-added services in supply chain management.

44.

At the same time, technology will render more services tradable. The Internet is accelerating this trend. Even highly personalised services like education and healthcare can now be offered over the Internet to people located thousands of miles away. Natural monopolies in certain service industries will also become increasingly threatened. For example, mobile phone service providers can now effectively challenge fixed line operators in the telecommunications market. The implication is that the services sector in every country will increasingly be subjected to global rather than domestic, or even regional competition.

45.

SIA, PSA and Changi Airport are fine examples of our service companies which are globally competitive. They competed globally from day one and showed that we can be world-class. Their success gives us confidence that the way forward is not to confine our services sectors to mere domestic market or to shield them from foreign competition. The way forward is to subject them to global competition, as we have done for manufacturing for years.