Speech By Mr Tharman Shanmugaratnam, Minister For Finance At The Ernst & Young Entrepreneur Of The Year Singapore 2008 Awards Gala, 27 November 2008, 8pm, St Regis Singapore28 Nov 2008
Mr Ong Yew Huat
Executive Chairman, Ernst & Young
Mr Wong Ngit Liong
President, Ernst & Young Entrepreneur of the Year (EOY)
Ladies and Gentlemen, and our entrepreneurs
2. It is a real pleasure to be with you this evening to celebrate the achievements and successes of outstanding entrepreneurs in Singapore. This marks the seventh year of the Ernst & Young Entrepreneur of the Year (EOY) awards, and today's nominees join others before them whose pursuit for excellence has been a source of inspiration to all.
The Economic Outlook
3. These are tough economic times. There is little visibility in the outlook, and forecasts of next year's GDP in the US and elsewhere are being revised every few weeks. The latest indicators coming out of the US suggest a sharp recession over the next few quarters - several economists now expect the US economy to fall by 3-4% on average in the fourth quarter of this year and the next two quarters. Elsewhere too, in Europe, the UK and Japan, the economic slowdown is deepening. The World Bank has just adjusted its forecasts for China's growth next year to 7.5%, from its earlier expectation of 9.2%.
4. We have therefore entered a very challenging period, with the US financial crisis that began over a year ago having mutated into a full-blown economic decline affecting most regions of the world. The world economy will eventually recover, but it may not do so early. It will take time to unclog the arteries of the financial system, and the impact of deleveraging on the corporate sector may be seen over a longer period than in most previous economic cycles. In Asia, the slowdown is also being complicated by political turmoil in some countries, which has undermined investor confidence and may have effects beyond the immediate downturn. The troubling events of the last few days in Bangkok and Mumbai have heightened these concerns.
Weathering the Storm and Emerging Fitter
5. We cannot avoid the effects of this deterioration in the economic environment. Singapore was in fact been the first to be affected in Asia, given our close links with the advanced global markets. It is the production of high value components and services that has been most immediately and sharply affected in global markets - in areas ranging from electronics and pharmaceuticals, to long haul travel. While we have a diversified economy, we cannot avoid the impact of this broad downturn in the high value activities in the global economy.
6. We can however mitigate the impact of the downturn, strengthen our capabilities and prepare for recovery. The Government has taken immediate measures in three areas - the property market, supporting a continued flow of bank credit to companies small and large, and enhancing subsidies for training of workers so as to help employers retain their workers and enhance their skills. In the coming Budget in January, we will announce a further, substantial package of measures to support businesses and households. It will be an expansionary Budget, involving a significantly larger fiscal deficit, adding to the effects of this year's fiscal deficit. The Budget will aim at helping businesses and Singaporeans to weather a slowdown that could last for more than a few quarters, and to prepare ourselves for opportunities in the recovery.
7. As with all economic downturns, however, some companies will fare better than others. Some companies will thrive, while others stay afloat and wait for better times, and some unfortunately fail. Crises have always been times when the strong distinguish themselves from the weak. The companies which will emerge from this fitter and better prepared for growth will very likely to be those who have built up strong balance sheets and avoided excessive leverage during the good years; those who have continually invested in their workers' capabilities; and those with entrepreneurial acumen that allows them to size up the risks and seize opportunities at times of difficulty. These will be the companies that survive and emerge stronger.
8. And it bears emphasising that there is still ample demand in Asia, even in the current troubled economic climate. Domestic demand in China, India and Southeast Asian markets is still growing rapidly, even as exports are falling off. Third and fourth tier cities across China are growing, many in the double digits, and every mayor is competing for a slice of the 4 trillion renmimbi spending package announced by the central government. Eco-industries and environmentally-friendly engineering services are in high demand. Across Asia, and indeed around the world, there are still opportunities for growth, and many Singapore companies are in fact participating in them.
Demonstration of Success
9. The three entrepreneurs we are recognising today, Mr Ong Pang Aik of Lian Beng Group, Mr Sunny Verghese of Olam International and Mr Sim Giok Lak of Zicom Holdings are in their own way good examples of persons who have patiently built up businesses based on real value, who have persevered through crises, and who are now well positioned for opportunities ahead.
10. Mr Ong Pang Aik has steered the Lian Beng Group through several construction downcycles and emerged stronger after each crisis. When the Asian Financial Crisis hit us, and was followed by a 10 year construction lull, he switched strategy and decided to take over half-completed projects from troubled companies. The Lian Beng Group also took the opportunity to acquire companies with good track records and to buy over construction equipment and machinery at fire sale prices. They also focused on enhancing the Group's technical capabilities, and invested in continuous upgrading of workers' skills.
11. Mr Sunny Verghese has been instrumental in steering Olam International from being a one product, one country business in 1989 to a global company in multiple products across over 60 countries today. Even in the current economic gloom and retraction in the commodity markets, Olam has continued to focus on future growth. It recently announced plans to acquire a sugar milling complex in India. In Olam too, training and development is a key strategy, so that it keep grooming managers who can build, lead and grow the business.
12. Mr Sim Giok Lak started Zicom Holdings thirty years ago with virtually no financial assistance and no technical expertise (he had spent 10 years in the accounting profession before going into engineering). The company has been through many past crises - the Gulf War, the mid-80s recession, the Asian Financial Crisis, the internet bubble, September 11. It has grown to become a leading hydraulic systems engineering company in Southeast Asia, with a global reach. The current gloom has not dampened Zicom's main source of revenue from oil and gas, for which it has forward orders up to 2011, is seeing it through the current economic downturn. It is taking the opportunity to upgrade its human capital, by putting its employees through a structured training programme.
13. Singapore will keep doing well if, like these three entrepreneurs and those before them, our companies focus on building value in their core businesses, avoid overstretching their balance sheets during the good years, and keep their eyes out for opportunities amidst economic gloom. In every sector, we encourage them to take full advantage of the wide range of Government schemes available - to build up capabilities of their people, to develop new technologies and designs, and to obtain credit for working capital, equipment investments and overseas expansion. These schemes are in place and are being enha nced and customised for each industry to help their businesses.
14. Working together, we can be confident that Singapore will be able to ride out this crisis, and emerge more competitive, better skilled, and prepared to take full advantage of the markets for growth.