Speech by Mr Chee Hong Tat, Senior Minister of State for Finance and Transport, at The 37th Singapore Economic Roundtable, on 5 December 202205 Dec 2022
A very good afternoon, ladies and gentlemen, and friends from the media. I am very honoured to have this opportunity to speak to all of you today. As Manu mentioned earlier, I would like to share some thoughts about our economy, and I would like to zoom in on one particular aspect of this which is sustainable growth.
2. We view economic growth as a means to improve our people’s lives and not as an end in itself.
a. As Mr Lee Kuan Yew once said, “it is in the interest of the workers and their unions that we must strive for growth and development. In other words, growth is meaningless unless it is shared by the workers.”
b. Our approach is not about pursuing economic growth at all cost, as some people described previously. There are other important objectives that we want to achieve too, such as protecting the environment and safeguarding our social cohesion.
3. However, as Dr Goh Keng Swee cautioned in his speech at the 1976 NTUC’s Second Triennial Delegates Conference, having a very low or zero economic growth means our society will face a zero-sum game.
This will intensify social conflict because one group can only benefit at the expense of another.
i. Instead of win-win, we can only have win-lose.
ii. And when unity is affected, win-lose will soon become lose-lose.
Elements of sustainable growth
4. What we want is to be able to achieve sustainable growth.
a. This will enable Singapore’s economy to continue to grow over the longer-term by finding innovative solutions to overcome our land, labour and carbon constraints.
b. And to rise above the near-term challenges that we face with a slowing global economy due to geopolitical conflicts and trade restrictions, higher interest rates and also rising inflation around the world.
5. Sustainable growth will allow us to continue creating good jobs and opportunities for our people, generate adequate resources to improve the lives of all Singaporeans, and provide hope and optimism for a better tomorrow for our future generations.
6. Today, I would like to speak about what I think are some important elements of this sustainable growth model for Singapore; and what are some of the trade-offs that we need to carefully consider as we navigate our way forward together as a society.
a. There can be different views and perspectives on this issue, and it is through conversations and dialogues such as the roundtable discussion we are having today, which will allow all of us to build a stronger common understanding and a shared vision of the journey ahead.
b. I also look forward to hearing from fellow panellists and members of the audience later, during our panel discussion.
International – Staying open and connected
7. Ladies and gentlemen, the first element I would like to suggest is that Singapore’s economy must continue to remain “international” by staying open and connected with the world.
a. This is not new, it is part of our Singapore story and how we make a living as a small city and a small economy with no natural resources.
b.If we close our doors to the world, we will end up shooting ourselves in the foot because the world will just move on, bypass us and use any of the competing hubs. We will then not have the resources to support future generations of Singaporeans.
c. It is also part of our social DNA as an immigrant society, where we welcome people from around the world to sink roots here and become part of the Singapore family over time, even though they are not born in Singapore.
8. However, what has changed around the world in recent years are two driving forces, which if not properly managed, could hamper our ability to keep Singapore as an open and cosmopolitan hub.
a. First, there has been a push-back against globalisation. This started before the pandemic, but Covid-19 and rising geopolitical tensions accelerated the momentum for countries to re-examine their assumptions about the reliability and resilience of global supply chains.
b. The old rules of free trade may no longer apply in this new operating environment.
i. Now, it does not mean rules have become irrelevant, but we need new rules that take into account the current realities by reforming and strengthening multilateral institutions including the World Trade Organisation.
ii. One example is the need for countries to agree on the rules for a digitalised economy, which go beyond our traditional free trade agreements.
iii. Singapore has been actively discussing Digital Economy Agreements with like-minded partners, to explore new areas for win-win collaborations.
9. Another trend is the rising concerns with foreign competition in a global economy, which has led to developments such as Brexit and xenophobia-driven politics.
a. These forces can affect Singapore too. You may recall the rise in anti-foreigner sentiments that we experienced during the pandemic, especially after the surge in community cases due to the Delta-variant.
b. Some people then tried to conflate this with our free trade agreement with India, by making false claims that CECA allowed Indian nationals to have free access to work in Singapore without restrictions. That is untrue.
c. We went through two rounds of extensive debates in Parliament on this matter to set the record straight that CECA does not result in unfettered access for Indian workers to enter Singapore, and how MOM has put in place appropriate measures to control the entry of foreign workers and ensure fair consideration for Singaporean workers. But it took us two rounds of debate in Parliament to clear this up.
10. The Government also explained on different occasions why it was necessary for Singapore, given our ageing demographics and our position as a global business hub, to remain open and welcoming to talent.
a. This includes developing our own local talent pipeline, so that we grow a strong Singapore core, plus attracting some complementary international talent to top up our workforce in areas where we do not have enough locals or where our people are still gaining experience or honing their skills.
b. But importantly, we will continue to assure Singaporeans that we understand their concerns about the competition from foreigners working in Singapore, but it is on balance still better for our people if we adopt an open approach, because we are then able to enlarge our economic pie and there is more for everyone to share.
c. The alternative is to have a zero-sum game or worse a shrinking economic pie when we lose competitiveness, and when businesses decide to shift their investments elsewhere. This will be a worse outcome for Singapore and Singaporeans.
d. We are providing protection and assurance to local workers that the Government is on this journey together with them, by ensuring that they will be fairly treated at the workplace; and we are also investing in their lifelong learning and skills upgrading to keep them employable throughout their careers.
e. This is important for all workers, but I think it is especially so for our mature and mid-career workers.
f. As part of Forward Singapore, we are studying how we can do even more in this area, and make SkillsFuture and lifelong learning a key part of our social compact in Singapore.
g. Just as we say in the Labour Movement that a good job is the best welfare for our workers, I believe the best form of protection for their employability is to invest in their skills upgrading because lifelong learning will lead to lifelong employability.
h. I also firmly believe that this approach is more effective in protecting our workers than building walls and erecting barriers to block out external competition. If we go down the path of protectionism, we must expect other countries to do likewise, to retaliate and they will block us too.
i.So being a small country without a large domestic market, Singapore will be disadvantaged if protectionism, xenophobia and isolationism become the norm in the global economy. We have much to lose and actually little to gain in this kind of situation.
11. Hence, this is one of the trade-offs that we will need to carefully balance as we look at ways for Singapore’s economy to achieve sustainable growth, and to strengthen our position as a global business hub.
a. Many Singaporeans understand why we need to remain open to talent and stay connected with the world.
b. But they also have genuine concerns that if there are too many foreigners coming to Singapore over a short period of time, it will impact Singapore’s social fabric and it could affect our cohesion.
c. The more we can assure and equip our people to have the skills and confidence to face the competition, the more ready we will be to welcome a complementary foreign workforce and also to integrate new immigrants into our society.
d. So that is the first element: How we can remain open and connected and for our economy to stay international.
Innovation: Raising productivity and enhancing Singapore’s competitiveness
12. Next, let me touch on the second feature of our sustainable growth model, which is about strengthening “innovation”.
13. This is critical if we want to overcome our constraints, and find new and better ways to raise productivity and enhance Singapore’s competitiveness.
a. We have invested steadily in public R&D for 15 to 20 years, and continue to focus on this important area going forward, through a combination of public and private sector funding. Our investments in R&D are bearing fruit.
b. We are also encouraging our companies, especially the MNCs and the large local enterprises, to collaborate with the government agencies, research institutions and institutes of higher learning to find more ways to commercialise their innovative technologies and R&D findings.
c. And to play the role of Queen Bee companies by helping the SMEs who are their contractors and suppliers to level up and to build stronger capabilities.
14. Singapore’s innovation ecosystem has become more vibrant, with more Venture Capital funds based here. We also see more students in our universities and polytechnics who are keen to become entrepreneurs and to do their own start-ups, and we are seeing more local unicorns.
15. We are encouraged by what we have achieved in the last 10~15 years, and we now have to keep working at it, to take Singapore to the next level of innovation.
16. I would like to suggest two other aspects of how we can further support innovation-driven growth in Singapore.
a. First, as a society, are we able to raise our tolerance for taking calculated risks and accept some failures along the way? Because if we have zero tolerance for failure, we will have zero scope for innovation.
b. In an earlier speech in Parliament, I spoke about a stone boat built that was by Emperor Qianlong in the Summer Palace in Beijing. He hoped that the Qing Dynasty would be like the stone boat – unshakeable and with zero risk of sinking. However, it is also a boat that is un-sailable and remains firmly stuck in the Summer Palace lake.
c. And we know what eventually happened to the Qing Dynasty, because it became an inward-looking society that was risk-averse and resistant to change.
d. When we build ships, it is not to anchor them in the harbour or in some lake in the Summer Palace. It is to sail out to the oceans and reach new lands. In doing so, we have to take calculated risks and be prepared to enter uncharted waters.
e. We can reduce our risk exposure by setting up regulatory sandboxes, so that we aim for safe-fail rather than fail-safe. And if the pilots are successful, we can then scale them up quickly across the system to achieve a bigger impact.
f. We have adopted this approach in the financial sector, for the green economy and also for certain specialised areas like the use of drones in the maritime sector, just to name a few examples.
17. The second area is whether our society can be more open to individuals who want to try something unconventional and take a less well-trodden path as they discover their interests and strengths, and how they can differentiate themselves from others.
a. Their journey may take longer and involve a more meandering pathway, but it is part of the learning and discovery process. It is also about creating the conditions for the seeds of innovation to grow, often in ways which we could not predict ex-ante, but we are amazed by the outcomes ex-post.
b. We are familiar with the story of how Steve Jobs combined his passion for technology with what he learnt in his calligraphy course to create beautiful fonts for computers.
c. A local example I would like to share with all of you is a group of 3 NTU students. Their names are Rahul, Abilash and Heetesh. They started this venture called Binjai Brew. They were engineering students and they spent a year together at UC Berkeley for their overseas exchange programme where they picked up knowledge on brewing craft beer from a local brewery.
d. After coming back to Singapore, they started experimenting with different methods to brew beer in their hostel.They were staying in Binjai Hall. That is how the name came about, Binjai Brew. So they applied their engineering skills on process control and optimisation to beer brewing. They managed to come up with 7 different types of beer, which they then shared with their friends.
e. But their journey was disrupted when NTU found out about their business venture and advised them it was not legal to brew beer in the hostel. Understandable. I was at MTI at that time, and I decided to meet up with the 3 young men together with my colleagues who were working on the Pro-Enterprise Panel, to see how we could support them.
f. We tried their beer, it was good. We discussed with them how we could simplify our licensing rules to lower the barriers for micro-breweries to get started, and I am pleased to say that their inputs have led to a subsequent simplification of our rules and a reduction in the licensing fees.
g. I was also happy to see them taking their idea further to partner a local craft brewery in Singapore to produce their beer in larger quantities. I recall seeing Binjai Brew being sold on Lazada and RedMart.
h. Whether Binjai Brew as a venture will succeed and whether it will grow further is not a certainty. Like many other start-ups, this is what entrepreneurs face when they start a new company or launch a new product. But I think the spirit behind what Rahul, Abilash and Heetesh did is something worth celebrating – taking calculated risks, pursuing what they are passionate about and not being afraid to take a less trodden path.
Inclusive - principle of collective responsibility
18. I have touched on two ‘I’s – international and innovation. Let me now move on to the third and final ‘I’ which is “inclusive” growth.
19. Left on its own without government regulation or redistribution, a market-driven economy will likely end up with unintended consequences such as widening income and wealth inequality and declining social mobility over time.
20. This will breed discontent and erode social cohesion. We cannot successfully move ahead if we are unable to stay together as one united people.
21. Meritocracy, which is how we have organised our society, has many strengths, but like all other ways of organising society, it has also its downsides and blind spots. I recall a view expressed by Fareed Zakaria who said in his 2018 article that “Meritocracy is under assault, but those who attack it should ask themselves: what would you replace it with? To select a society’s elites, as Winston Churchill said of democracy, a meritocracy is the worst system – except for all the others.”
22. So the key for us is not to reject or discard meritocracy completely, unless there is a better alternative to replace it, but to look at how we can address its downsides as part of our social compact.
a. For example, could we soften its rough edges by ensuring that ours is a continuous and compassionate meritocracy?
b. Continuous in the sense that an individual’s success is not determined by one or two high-stake events in his or her life, whether it is a national exam, academic qualification or job opportunity, but a lifelong journey with multiple opportunities to shine and demonstrate one’s talent and capabilities along the way.
c. And compassionate in the sense that when a person does well, he or she will understand that success is not just because of one’s talent alone, but also due to the support and recognition from society.
d. And therefore, someone who is successful has a social responsibility and duty to give back and help others through philanthropy and volunteerism. When we drink water, we remember the source of where the water came from.
23. This is why we have policies like Progressive Wage Model and Workfare Income Supplement, to boost the earnings of our lower-wage workers and narrow the income gap between them and those who are earning median or higher wages.
24. This is also why we are investing heavily in good quality and affordable early childhood education, to ensure that children from lower-income families will also have a strong foundation early in life compared to their peers.
25. But such interventions cost money, not just from Government fiscal resources alone, but the cost is also borne by employers. In the case of low wage workers, by paying them better wages and giving them better staff benefits and also by consumers through higher prices, and also by all Singaporeans collectively through our fair and progressive tax and distribution system. This is why it is an important part of our social compact because this is something which is a collective responsibility.
26. In his Budget statement this year, DPM Lawrence Wong explained how the principle of collective responsibility is a key feature of the Singapore system.
a. He said, " Those with greater means bear a higher burden, and they draw less on Government support, but they still enjoy some benefits from the Government. Those with fewer means carry a lighter share, but they still contribute something, and in return they receive more benefits from the Government – more than they put in, and more than the better off.”
b. A lower-income family in Singapore will receive about $4 in benefits for every dollar of tax they pay. A middle-income family will receive around $2 in benefits for every dollar of tax paid. For the sums to add up, this means that higher income families will receive less than what they paid in taxes.
27. We apply this principle too when we design our GST system, by giving more help to lower and middle-income families through the Assurance Package and permanent schemes like GST Voucher scheme, U-save rebates and S&CC rebates. Unlike the original form of GST which can be regressive, the way we have implemented the GST in Singapore does not hurt the poor.
a. This is why 50% of the net GST collected [from households and individuals] comes from tourists and foreigners in Singapore, 20% comes from the top 20% of households and the remaining 30% is spread over the other 80% of households.
b. It is also why we are able to cushion the impact of the GST increase for most Singaporean families, delaying it for 5 years for middle-income families and more than 10 years for lower-income families.
28. A key question for us is whether our people will continue to support such a social compact that is based on collective responsibility, where everyone pays some taxes but the lower- and middle-income will receive more benefits than the taxes they paid, while the higher-income will pay more taxes than the benefits they receive.
29. This is part of the consensus we hope to build via the Forward Singapore conversations, including our roundtable discussion today.
30. Ladies and gentlemen, let me conclude, I hope I have been able to persuade you why sustainable growth is important for Singapore.
a. And this growth needs to be anchored on a few key elements: international, innovation and inclusive;
b. so we can improve the lives of our people and achieve happiness, prosperity and progress for our nation.
31. This is something that I hope to be able to do not just for this current generation but also for future generations. I look forward to hearing your thoughts and views during the panel discussion.
32. Thank you.