Keynote Address by Mrs Lim Hwee Hua, Minister in Prime Minister's Office, Second Minister for Finance and Transport, at the PricewaterhouseCoopers Forum Dinner 2009, on 10 September 200910 Sep 2009
Mr Gautam Banerjee,
Executive Chairman, PricewaterhouseCoopers LLP (Singapore);
Ladies and Gentlemen,
Introduction: Brave New World
1. Good evening. It's a brave new world indeed.
2. I understand that the theme of this year's conference was inspired by Aldous Huxley's novel Brave New World by the same name. Written in 1931 during the Great Depression, the novel had painted a frightening picture of a future world that is unsettling and sinister to our imagination. The phrase brave new world is often used to caution against the dangers of runaway science and technology.
3. Drawing an analogy to the world economy today, to a certain extent, we can identify with the dangers of runaway CDOs and the same sense of pessimism and fear for the future. We are facing a severe global recession, arguably the worst crisis since the Great Depression. In fact, in our darkest moments late last year and early this year, some prominent players were even predicting the collapse of the global financial system along with the failure of major institutions like Lehman Brothers and AIG.
4. Thankfully, the concerted and decisive efforts of many governments and central banks have helped to stem the risk of such a catastrophic scenario. The situation has somewhat stabilised these two quarters. In fact, there have even been a few positive indicators, or what is popularly referred to as the "green shoots" of recovery. In general, spirits have been lifted and confidence is returning, although it is still too early to tell if we are out of the woods.
Anticipating a New World Order
5. While the situation appears to be no longer so dire, as with any major shock to the system, there will be profound structural changes that will shift the equilibrium towards a New World Order. Some of these trends have already begun to take shape. Let me share my thoughts on three of these trends.
Trend 1: Rebalancing of the Global Economy
6. The first is the inevitable rebalancing of the global economy. As many economists have observed, a "delicate rebalancing act" of international trade flows would be required for a global recovery. As the US and EU go through a deleveraging process, consumers there are likely to save more and spend less. On the other hand, Asia, and in particular China, would have to boost domestic and intra-regional consumption so as to reduce their reliance on Western export markets. With rising affluence and rapid urbanisation, Asia will offer new opportunities for growth.
7. This rebalancing, together with the growth of emerging economies, will also spill over to the geopolitical and economic space. Taken together, Brazil, Russia, India and China or the BRIC countries, already have a 15 percent share of the world economy and 42 percent share of global currency reserves. China alone reportedly holds more than US$700 billion in US Treasury securities, making it the biggest foreign holder. As they increase in economic clout, these economies will naturally seek greater voice and representation in the global arena. This is not to say that China is about to replace the US as the next super power. A more likely scenario is the ?rise of the rest? where US dominance will be slowly but surely balanced against new powers such as the BRIC nations in a multi-polar world.
Trend 2: Increased Domestic Protectionist Pressure in Many Countries
8. The second is the increasing domestic protectionist pressure faced by many governments
9. At the G-20 meeting last November, world leaders collectively pledged to promote global trade and to reject protectionism. While this commitment is encouraging, such consensus can in fact be quite fragile and be vulnerable to domestic pressures if the recession is prolonged. Hence, the risk of protectionism remains and with it, the unwinding of the benefits of globalisation.
Trend 3: A Global Green New Deal
10. The third is the shift towards a more sustainable, low-carbon economy. In February this year, the United Nations called for a Global Green New Deal, urging countries to combine economic stimulus with policy action to combat not just the financial crisis but also climate change. This seems to have gained traction. For example, China, US and South Korea together will be spending almost US$400 billion over the next five to ten years on environmental protection, energy efficiency, transport and water solutions. Apart from contributing towards efforts at more sustainable economic progress, these massive investments will also create millions of green-collar jobs and spur business opportunities in these fields.
Enhancing Singapore's Competitive Position
11. So what does the future hold for Singapore? Although we have been severely impacted by the economic downturn, I am confident that we will emerge stronger and more competitive when the global economy recovers. The $20.5 billion Resilience Package that the Government introduced in Budget 2009 has helped our companies to overcome the short-term difficulties brought about by the crisis. A recent survey on the Resilience Package conducted by the Ministry of Manpower provides positive anecdotal evidence.
12. We would have to continue to build on our sound economic fundamentals. Investors are attracted to our reputation for having a business-friendly environment, a collaborative tripartite system system, and a cosmopolitan and cohesive society. The Government's long-standing fiscal prudence has allowed us to fund our large fiscal stimulus package without borrowing, maintain our tax competitiveness, and actually be able to further reduce our corporate income tax rate from 18 percent to 17 percent in the midst of a recession.
13. These fundamentals will stand us in good stead for the economic recovery. Borne out of a need to survive, we have over the years, continuously anticipated new challenges and reinvented our value proposition to seize new opportunities.
14. Adapting to change is second nature. Our economy has transformed within our fifty years of self-government. In the early days, we industrialised rapidly through an export-oriented strategy and aggressively attracted foreign investors to develop our manufacturing and financial sectors. This helped to create jobs and lower unemployment in a newly independent Singapore. Over the years, we have progressively moved up the value chain and grown from a labour-intensive manufacturing base into a globalised and diversified economy. By not being afraid to adapt to changing circumstances, we not only survived through multiple crises, but have steadily developed and prospered.
Economic Strategies Committee
15. As the world moves into a very different economic environment, we have again sought to reposition ourselves for future growth. An Economic Strategies Committee, or ESC, has been formed to develop strategies for Singapore to build capabilities and maximize opportunities in the new world environment, so as to achieve sustained and inclusive growth. This is a major task requiring both the public and private sector inputs.
16. I am co-chairing a Subcommittee that will look at how we can develop a vibrant SME sector and nurture globally competitive local companies. This is an important aspect of ESC's work. We want to strengthen our enterprise ecosystem - a conducive and supportive environment where ideas can flourish, and individuals and small enterprises can grow into global champions and iconic companies. I welcome your views and feedback on what the Government can do helping this and other areas of the ESC.
Need for Companie s to Continually Reinvent and Adapt
17. The ESC process aims to position Singapore and outlines how we can capture global opportunities and grow the economy. But the economy is really the sum total of all the moving parts. Companies, too, must reinvent and adapt on their own to be ahead of the pack.
18. As I have said earlier, a new world order could fundamentally change global balances of economic power and patterns of consumer spending. Singapore-based companies may face a temporary scaling back in demand from their traditional markets. Those that are quick to acquire new businesses or competencies, or diversify into new emerging markets and sectors will be able to exploit these trends to their advantage.
19. Similarly, companies should identify and invest in new capabilities and skills. This could range from higher productivity or better service standards to more energy-efficient processes. The Government offers assistance in many ways, for example through manpower training schemes such as Skills Programme for Upgrading and Resilience (SPUR) and Professional Skills Programme (PSP), as well as research and development support from our universities and polytechnics. Companies should make use of such tools to develop new skills and capabilities.
20. The Government is committed to facilitating business and commerce, and to ensure that Singapore remains an attractive and competitive value proposition.
21. I look forward to an insightful and invigorating panel discussion tonight on what your business and your industry are prepared to do to not only survive, but also excel.
22. Thank you.
* According to the World Bank, several countries have implemented 47 measures that restrict trade at the expense of other countries since the G-20 meeting in Nov 08. These include raised tariffs, tightened standards or bans that reduce im