Keynote Address By Mrs Lim Hwee Hua, Minister In The Prime Minister's Office And Second Minister For Finance And Transport At The 15th Student Leaders Convention On Wednesday, 3 June 2009, At 9am In Hwa Chong Institution's Clock Tower Auditorium03 Jun 2009
Mr Peter Yeo, Chairman, Board of Govenors, Hwa Chong Institution
Mr Ang Wee Hiong, CEO/Principal, Hwa Chong Institution
Ladies and Gentlemen
It gives me great pleasure to deliver the keynote address this morning at The Student Leaders Convention 2009 co-organised by Hwa Chong Institution and Nanyang Girls' High School. I wish to begin by first congratulating the two schools for their good work in organizing this very important event and welcoming all student leaders to this Convention.
2. The theme for this convention is "Welfare and Development: The Economic Challenges for Youth". This is a very important topic especially in light of the financial crisis and the deepening economic recession. Today I want to identify a few lessons that I think students in general and particularly, student leaders, who will be leaders of Singapore tomorrow, need to think about and learn from. Whenever unexpected and unprecedented events occur, the scope and potential for learning is far greater than during normal times.
Globalisation and Complexity
3. The first lesson is that the world is interconnected and globalised. This is not new, globalization is a phenomenon that has taken place over the last few decades; but the global crisis has illustrated just how dramatic and real the consequences of globalization can be.
4. The collapse of one market - in sub-prime mortgages in the US - has led to a freeze in global financial markets and affected economies and trade the world over. It is instructive that the collapse of financial markets in the Western nations has led to some of the sharpest falls in exports for Asian nations. Those who thought that Asia could grow on its own, insulated from the rest of the world, were proven wrong.
5. Globalised markets mean that "contagion" effects are more strongly felt. When fear grips the financial markets, subtle distinctions are lost. Hence in 1998 when there was an Asian Financial Crisis, even Singapore, with our sound fundamentals, was initially hit even because we were part of Asia and investors did not make the distinction. With the recent financial crisis, it was not just one sector of financial markets that was affected but all markets that have been seized by fear and distrust.
6. In the modern global economy, the speed at which effects of a crisis ripple across the world is dramatic. In a world linked by the internet and broadband, information truly travels at the speed of light. News of a downturn which affects financing and customers at one end of the world, have rapidly affected producers and exports on the other side of the world.
7. Student leaders of today must recognize that the world we inhabit will become ever more complex, uncertain and difficult to comprehend. Operating in an environment with imperfect information and uncertainty is something that the leaders of tomorrow must be equipped to deal with. Often, not all information will be at hand when leaders are called upon to make a decision.
8. Other times, there will be popular pressure to act in a certain way or the outcome of decisions may appear to be bad from a short term perspective. But leaders of the future must have the intelligence and resolve to look beyond the short term, and look through superficial impressions to make decisions based on long term interests and a deep understanding of the world around them.
9. It is important that we recognize that there is no turning back from globalization. Protectionism is not a solution to the situation that we face today. What we need to do is to develop a better understanding of the complex relationships that make up complex global networks. To do so requires openness to new ideas and a keen desire to learn and broaden your horizons.
Preparing for Black Swans
10. The second lesson of this crisis is that we must always be prepared for once-in-a-lifetime events, because there is a good chance that they will happen in our lifetime, and one catastrophe is all it takes to undo all the accumulated good work. The term that has been used is "black swan" - events that are large-impact and hard to predict. We usually expect swans to be white, but there are on rare occasions "black swans", which are beyond what we normally expect.
11. As a country, Singapore takes the possibility of a black swan very seriously. The frailty of the human mind is such that if a trend persists for a few years, we think it will continue that way forever. But we must not believe too strongly in recent fads or trends that may be unsustainable, even though it is conventional wisdom of the time - that is a "herd mentality" which is one of the causes of the current crisis. In 2007, many people thought that because the economy was doing very well, it would continue indefinitely.
12. We must remember that Singapore is less than 50 years old, but financial crises have a history stretching back some 500 years. Our experiences are but a drop in the ocean of history and we should never assume that our circumstances and development will always remain rosy.
13. It is precisely to protect against catastrophic events that are difficult to foresee that the Singapore Government has accumulated large reserves. In the current economic downturn and crisis, many countries have had to spend large amounts to provide a fiscal stimulus, to take part ownership of companies and to help households in need. Most of this has been funded by borrowing and or cutting back on other expenditures.
14. But these large expenditures funded through borrowing impose a significant cost, especially for countries that have not been able to accumulate reserves. There are trade-offs involved and sacrifices to be made. Those of you who study economics will understand that borrowing will place burden on future generations. So the reality is that the younger generation will have to pay off the debts of the current generation through higher taxes or some other means. There will also be an opportunity cost involved as long term public expenditures in areas such as healthcare and education are reduced to provide fiscal stimulus now.
15. During these difficult times, Singapore has had the benefit of having reserves, first to help guarantee bank deposits, and second to fund some of the extraordinary measures announced in Budget 2009. Also important is the stream of investment income from the reserves.. This provides us the ability to maintain our spending on important areas such as research, transportation, education and healthcare despite short-term erosion of revenues.
16. As a small country reliant on exports, Singapore is highly sensitive to a global recession. Indeed our exports and GDP have been one of the first, and one of the most significantly hit. We need to ride out the storm and Singapore's way of ensuring this has been to focus on fundamentals - making Singapore an attractive place to invest and building the skills and capabilities of our people. The ability to focus on the long term while dealing with the short term is due to prudent financial management - our reserves allow us the flexibility that many other governments do not have.
Preventing Potential Divides
17. The third point I would like to draw your attention to is the issue of potential divides within society as we encounter a recession. Difficult economic times will test the social fabric of society and especially as the current recession will increase unemployment. This will be a test of our resilience and society must play its part to help those who have been worst hit by th e recession.
18. There are three potential stress points, or divides, that the Prime Minister has recently highlighted. The first potential divide is between Singaporeans and non-Singaporeans. The second concern is between the more successful and less successful. The third potential strain is between races and religions. We must be careful that these do not become points of conflict for Singaporeans and rob us of our social cohesion.
19. First, it is important that Singaporeans not turn insular or protectionist. Whatever success and development we have achieved has been a result of our openness to trade, investment and people from all over the world. That is what makes Singapore distinctive as a country ? there are many cosmopolitan cities, but we are a truly cosmopolitan country. This has allowed Singapore to thrive and for Singaporeans to benefit from high standards of living. We should not forget that most of our ancestors too were immigrants and foreigners in the past.
20. Second, we must ensure that low-income Singaporeans continue to have the opportunities for social mobility. In the aftermath of the Asian Financial Crisis, many children in some Asian countries became a lost generation as the economic catastrophe plunged them back into poverty and they had to drop out of school and turn to child labour and crime to survive. The government has and will continue to take steps to ensure that this will not happen in Singapore and education and re-training remains accessible. We will continue to invest in education at all levels for the young, and also for adults to allow them to upgrade their skills, and ensure that it remains affordable for all Singaporeans.
21. During these difficult times, Singaporeans must band together and help the community, I urge you to volunteer your time and be generous with your donations, however small they may be. The government will play its part but it is important that there are many helping hands - this is the time not just for business entrepreneurs but also social entrepreneurs, individuals who are passionate and innovative in supporting social causes and helping other Singaporeans.
22. Third, Singaporeans must recognize the true diversity that exists in Singapore in race and religion. We must not allow economic difficulties to spill over into irrational or emotional resentment along these lines. At the same time we must continue to ensure that Singaporeans continue to enjoy a common secular space where trust, confidence and respect between religions and races can be built. This will allow each Singaporean the personal and private space to practice his or her own religion without having the views of others imposed upon them.
23. The current times are difficult, young leaders today must keep abreast of global developments and learn lessons from adversity so that when you are in future positions of leadership, you will be able to make the right decisions with the benefit of experience.
24. I wish all of you every success in all your future endeavours, as well as a very fruitful Convention ahead. Thank you.