Embargoed until after delivery Please check against delivery SPEECH BY MR CHAN CHUN SING, MINISTER FOR TRADE AND INDUSTRY, DURING MINISTRY OF TRADE AND INDUSTRY (MTI)’S COMMITTEE OF SUPPLY DEBATE, ON TUESDAY, 2 MARCH 2021 “REBUILDING TO EMERGE STRONGER AND MORE COMPETITIVE” Introduction 1. Mr Chairman, I thank the Members for their excellent questions and suggestions. Over the past week, much has been discussed about a. how we should or should not use our reserves; and b. how we can and should do more for various groups in society. 2. However, we must not lose sight of how we, first and foremost, need to earn our keep – for this and future generations, under the shadow of the COVID environment. a. We are still trying to get out of the most serious economic recession since independence. 3. We are not returning to a pre-COVID world. a. Even if our GDP returns to pre-COVID levels quantitatively, we will have a qualitatively different economy then. i. The share of sectors and industries will be different. ii. The types of products and services we manufacture and trade with the world will be different. iii. The types of skills we need to earn a living will be different. b. We must start now to build this new economy. 4. I will be frank: There are many challenges and downside risks. a. Geopolitical tensions remain a concern. b. Technological disruptions are accelerating. c. The COVID-19 virus is mutating, and the pace of vaccine rollouts is uneven. This will complicate countries’ recovery from the pandemic. 1 Embargoed until after delivery Please check against delivery d. All countries have spent enormous amounts to stabilise their economies. They will contest for fiscal revenue, leading to tax policies that distort investment, production and trade decisions. e. The rules-based global trading order, underpinned by the proper functioning of the WTO, is also under strain. f. Global supply chains are being reordered and reconfigured, not always for economic reasons. 5. Mr Liang Eng Hwa and Mr Desmond Choo asked how we can remain competitive and relevant amidst these disruptions. 6. The short answer? We must turn these challenges into opportunities. We must a. Be a safe harbour for capital, talent and ideas in an uncertain world. b. Be a connected, trusted and resilient node, both physically and virtually, in order to serve different markets in a bifurcating and fragmenting world. c. Embrace new technologies to be the disruptor, rather than be the disrupted. d. Master digitalisation to transcend the constraints of our size and geographical location. i. Where mastery of data can provide increasing returns to scale. e. Leverage our small size to pivot faster and more nimbly than our competitors. 7. Over the last 6 months, MTI has visited our companies and businessmen weekly to see how we can work with them to overcome the immediate challenges and seize the longer-term opportunities. 8. These plans have been widely reported in the media, so I will not repeat them today. a. Instead, I will draw together the 3 broad strategies that we must execute well, consistently and coherently. 9. First, strengthen our position as a global hub for business and technology. 10. Second, entrench ourselves as a critical node in global value chains that make us hard to displace. 2 Embargoed until after delivery Please check against delivery 11. Third, build real and unique capabilities in our enterprises and workers so they can compete in a more globalised world. Strategy 1 - Global Business Hub 12. Mr Liang Eng Hwa and Ms Foo Mee Har asked how Singapore performed as a business hub amidst COVID-19. 13. We have done credibly so far. a. In 2020, we attracted investment commitments amounting to S$17.2 billion in Fixed Asset Investments and S$6.8 billion in Total Business Expenditure. b. These are votes of confidence and faith in Singapore. 14. We should be proud of how we have responded, but we must also press on. 15. The ease of digital connection, collaboration, supervision and even execution will redefine the role of hubs for businesses. a. Lower value-added activities will increasingly be offshored to remote working sites, as they are no longer constrained by geographical boundaries. i. Work from home means work from anywhere - in the world. ii. Competition will never be local but always global. 16. However, the world will still need high quality business hubs for high value-add transactions and trusted collaborations that must be executed via physical interactions. 17. For Singapore to be in this global class of the few high-quality, high-trust business hubs, we will need to create an environment where we distinguish ourselves. How? a. First, with clear, transparent, consistent and coherent legal and policy frameworks to do business – to mobilise capital, aggregate talent and protect IP. b. Second, with progressive rules to enable new business models to thrive. c. Third, with superior networks that give us denser and more secure connections with the world, allowing global businesses to operate out of Singapore. d. Next, with a mix of local and global talent to serve global markets. 3 Embargoed until after delivery Please check against delivery e. And finally, by entrenching critical parts of the R&D value chains, so businesses will include us as part of their global innovation networks, even in times of crisis. 18. These are the reasons why we are investing heavily in: a. the development of our local talent, b. the attraction of global talent to complement and reinforce our talent pool, c. our physical trade and digital connectivity, including free trade agreements and digital economy networks, d. our R&D – from basic research to translational research for commercialisation, and e. our IP regime – from assessment to valuation and even arbitration. 19. We must get all these enablers right, to strengthen our position as a global business hub. 20. With all these enablers in place, we are confident that our reputation as a trusted and efficient place to do business will distinguish us from the competition. a. But we are not complacent. b. We are ever aware of the growing competition. Strategy 2 – Entrenching Ourselves in the Global Value Chains 21. Indeed, the basis for competition has changed. a. While quality and cost competitiveness still matter, other more important factors have arisen, such as: i. the speed to evolve new products ii. the speed to serve new markets iii. the resilience of supply chains iv. and the quality of new ideas, since intellectual capital is fast overtaking physical and financial capital as the defining competitive yardstick. 22. Ms Jessica Tan and Mr Liang Eng Hwa asked about growth sectors, and how we can seize opportunities in the reorganisation of global supply chains. 4 Embargoed until after delivery Please check against delivery a. We are looking out for emerging sectors such as agri-food tech, urban mobility and sustainable urban solutions. b. MOS Alvin Tan will elaborate on how we will help local businesses venture into the agri-food tech sector. 23. But instead of just pursuing new “sunrise” industries, we also need to pursue critical capabilities needed to anchor ourselves in every industry that we choose to compete in – be they “sunrise” or otherwise. And that is why our second strategy is to entrench ourselves in the critical niches of the global value chains. a. Take the semiconductor industry for example. i. How much we produce and how much global market share we currently command is not the most important. ii. What is most important is whether we have access to the IP to produce the chips, and to build the machines that produce those chips. iii. Moving further upstream, do we have the talent and talent networks to continuously innovate, to improve our processes and their quality, so global companies will want to site their operations here, and create better jobs for our people? b. These questions apply to high-tech industries like semiconductors, biomedical, and info-communications; just as much as they apply to precision engineering and even to the manufacturing of humble surgical masks. 24. Recently, I visited various enterprises and research institutes to better understand the new world of manufacturing, and to see how they are incorporating Industry 4.0 technologies – from data analytics to additive manufacturing. a. A product that used to require the assembly of multiple parts can now be produced as one simple part, with additive manufacturing enabling much higher precision and less waste. b. A product that used to take years to evolve can now be designed and redesigned in days. c. A production system that used to be put together only after the product design is completed, is now being put together while the product design is being conceptualised. d. The speed of product and production system evolution has just accelerated beyond imagination. 5 Embargoed until after delivery Please check against delivery e. The ability to set standards for adoption in a fast-paced market has become critical to a product’s success. i. The “good enough” and fastest, will beat the better but slower. ii. There is much we need to learn. We must change our perspectives on what competition means today. 25. Doing what others do at a cheaper price is a “Red Ocean Strategy”. In other words, these are shark-infested waters, best avoided. a. Producing things that others cannot is a “Blue Ocean Strategy”. Here opportunities abound, and competition is less. b. That’s where we want to be. 26. Similarly, we can no longer merely be a place of arbitrage.