新加坡总理吴作栋理国庆群众大会演讲

INTRODUCTION

CLIMBING MOUNT EVEREST

When the Singapore team successfully climbed Mount Everest(中国称珠穆朗玛峰)) in 1998, I cheered. I spoke² to Khoo Swee Chiow and his team-mates later.

They told me that they climbed up in stages, from Base Camp(探险队等的营地) to Camps 1, 2, 3 and 4, before they made their assault for the summit. The climb became more difficult and dangerous the higher they went. The air became thinner and the slope steeper. You had to be disciplined, determined³, and well prepared. And you had to have luck on your side. There could be avalanches⁴ and rock fails, or the weather could change suddenly. Swee Chiow told me that the most important quality needed to climb Mount Everest was mental strength.

The climb up Mount Everest provides a vivid image for Singapore's own climb up the mountain of economic development.

Senior Minister brought Singapore up to Camp 2 -- from labour intensive to electronics and higher value-added industries. In the last 10 years, we have climbed higher to Camp 3, with wafer fabs(wafer fabrication的口语表达,晶体管加工), chemicals, and financial services. Now, we are making our way to Camp 4, to do IT, life sciences, and other knowledge-based activities. If we make it to Camp 4, we can then try to scale the summit where countries like the US, Japan and Switzerland are.

But let me warn you. As in the Mount Everest climb, the going will get tougher from here. As we go higher up the mountain of economic development, progress will be slower. We will not see the same high growth rates as in the past. We will have to work smarter and acquire more sophisticated capabilities⁵ to overcome complex challenges. We will be tempted⁶ to relax. Indeed, some Singaporeans have asked: "Do we need to be Number One in everything?" We will need great mental strength to continue pushing ourselves to excel. If we do not do so, others now behind us will push us off the track.

Tonight, I want to focus on this next stage of our economic climb.

THE CURRENT DOWNTURN

But first, let me touch on the current economic downturn.

When I met the media earlier this week, they told me that Singaporeans would expect me to speak in detail on the slowdown, and offer solutions.

I explained why I did not intend to do so. We have already discussed on many occasions our short-term problems. I want to deal with the long-term challenges. Of greater concern to me are the fundamental shifts in the global economic environment, and the fact that many of the jobs which are lost during this slowdown, might never return after recovery. We need a new strategy to respond to these developments.

Moreover, during the 1997 Asian financial crisis, we had put in place a major package of rebates⁸ and cost-cutting measures. Parts of this are still in effect, including the CP17 cut. Then, in this year's budget, Richard Hu cut corporate⁹ and personal taxes, and gave rebates on S&C charges, rentals¹⁰ and utility bills. Recently, George Yeo announced another package to deal with the current economic slowdown.

Let me assure you that if the slowdown drags on, we have the means and ability to do more to help you. And we will help you. My Ministers and I are watching the economy very closely. We are working out possible additional measures, just in case the economy continues to worsen and we need to administer a second package.

Our current problem is the consequence of being a small, open economy, highly dependent on external trade and foreign investment. When the US and other major economies were growing, we caught the strong winds and surged ahead. Now that the winds have died, our growth has slowed to almost a standstill. We do not have a large domestic market to go against changes in the wind in the external environment. We just have to cope with them. What the Government can do, however, is to make sure that the economy stays competitive over the long term, and soften¹¹ the impact of downturns on businesses and workers through cost-cutting measures and rebates.

We are doing the right things, In a recent survey of 12 Asian countries by PERC, a Hong Kong-based risk-analysis consultancy, Singapore ranked number one for quality of government policies. PERC reported that: "Singapore is a poster-boy of how to pursue economic development... Now that the economy is slowing in response to the downturn in electronic exports to the US, the (Singapore) government is coming up with new measures to bolster¹² growth. Yet it is not panicking, nor is it radically¹³ changing other policies that have been a source of stability and fortified¹⁴ investor¹⁵ confidence. " (Asian Intelligence, July 25, 2001)

So do not lose confidence. Do not walk around with your head ~an ing so low, as if we have been diagnosed with a grave condition. We might be a little out of sorts, but it is not life-threatening. When the global economy recovers, so will we. We should therefore keep our spirits up, and fight off any gloom. There is a bigger battle after this. We can succeed only if our morale¹⁶ is high.

THE LAST TEN YEARS

Let us plan the next stage of our economic climb even as we deal with the current slowdown.

I had earlier given the media a booklet on the progress we made in the 1990s. A copy has also been given to you.

This record of our achievements sets the current downturn in perspective. The last few years have been volatile¹⁷ -- good growth in 1997, sharp downturn in 1998, recovery in 1999, 10 per cent growth in 2000, and now another downturn. But taking a longer view over the last decade, we have made considerable progress.

This should give us the confidence that we can climb higher. We have strong fundamentals. We have a tested team of experienced Ministers, MPs, grassroots and union leaders, and civil servants. We have capable people in the private sector¹⁸ and a united population. And we have the resources to invest in new ventures and capabilities.

Our economy grew faster in the 90s than in the 80s, despite the 1997 Asian financial crisis (7.7% per annum, as against 7.3%). I was also quietly satisfied that we realised our vision of reaching the 1984 Swiss standard of living last year. In 1984, we had set this as a target to be achieved by 1999, but we missed it by one year because of the crisis.

The Government distributed back to Singaporeans a good part of the wealth generated from this strong economic growth. We shared close to $14 billion through asset-enhancement programmes and endowment funds. We invested in better healthcare, housing and education. Singaporeans' standard of living went up considerably¹⁹.

We also livened up the arts, cultural and leisure scene. Two years ago, Time magazine described our city life as "funky²⁰". More recently, Australia's Canberra Times said that Singapore was "hip²¹" and "cool".

Ahh! Now, we even have foam²² parties! 1 thought foam parties were for children, but 1 saw pictures of adults enjoying themselves too. That is all right, so long as the merry-makers prance²³ around with the lights and their clothes on.

Fortunately, we also have high-browed stuff like plays, ballets and musicals. Tonight's Rally is held here instead of the usual Kallang Theatre because I gave way to "Miss Saigon".

BUT THERE ARE GAPS

However, there were also areas where we could have done better. I will mention only two, just to remind Singaporeans not to be complacent²⁴.

Our service standards can be improved. Our newspapers carry many complaints of poor service in our shops and restaurants, by taxi-drivers, and even in our hospitals and banks.

We can also be more gracious and considerate, at home and in other countries.

For example, some Johoreans have described Chinese Singaporeans as "hao lian" or "show-offs". They claim that Singaporeans love to speed and beat traffic lights when in Malaysia; behave as if they are "ABC" or "American-born Chinese"; and love to shout "very cheap, very cheap!" while shopping.

I would add that we are too 'kiasu'. For example, at buffets²⁵, we pile oysters²⁶ on our plates as high as Mount Everest.

I think our less than gracious behaviour is because we have become affluent²⁷ too quickly. Our social graces have not kept pace with our material progress. Let us be humble²⁸, courteous²⁹, and gracious in our behaviour and attitude. Let us make friends with our neighbours, especially Johoreans.

MORE CHALLENGING ENVIRONMENT AHEAD

The next ten years will be tougher than the last ten.

Our operating environment has changed tremendously. We are now in a new phase of global development. There is only one pre-eminent³⁰ world power - the US. Nevertheless, the US cannot ignore the rapid emergence³¹ of China.

US-CHINA RELATIONS

Indeed, the US-China relationship will be the defining factor in global economics and politics in the coming decades. If it goes wrong, Asia will suffer. The US sees tremendous opportunities in China's economic growth, but at the same time, it worries over China's growing power.

How US-China relations will evolve is still too early to say. President George W. Bush spoke to President Jiang Zeming on the telephone recently. According to President Jiang, "Although it was not a video phone where I could see his facial expression, from his voice, I could feel that he was a President we can do business with." I hope that when the two Presidents meet in Beijing in October, and see each other's facial expressions, they will find that they can do business with each other.

EAST ASIA

Within East Asia, there are other flashpoints. Cross-strait relations between China and Taiwan are troubled. The momentum³² of reconciliation³³ between the two Koreas have slowed down. In the South China Sea, several countries claim the atolls and reefs there. If this leads to conflict, sea lanes of communications and international trade will be disrupted, affecting us.

The outlook for our immediate³⁴ neighbourhood also remains³⁵ uncertain.

Indonesia has just elected a new President, the third in three years since Suharto stepped down in 1998.

President Megawatti inherits a country in which parts are threatening to break away, and the economy is in a grave state. Indonesia will take many years to recover.

The Malaysian economy bounced back briefly³⁶ after the 1997 Asian financial crisis. However, international investors³⁷ remain wary³⁸.

Other countries in Asean are also facing various difficulties.

As a result, Asean is at a low point. Investors are negative about the region's prospects³⁹.

Singapore will feel keenly the effect of this uncertainty⁴⁰ in the region.

THE CHINA CHALLENGE

Moreover, our economy is uncomfortably sandwiched between the developing and developed economies.

Many developing economies are fast catching⁴¹ up with us in technological⁴² capability⁴³. What's more, they have much lower costs of production. For example, our wages for manufacturing workers are more than 12 times that in China and India. Our industrial land costs about US$300 per square metre. In Shenzhen, it costs below US$10. Fortunately, we are no longer competing in low-end manufacturing, where low wages and low land prices are critical.

But still, China poses a big economic challenge. Some economists⁴⁴ describe China as an "800-pound trading gorilla⁴⁵". A Hongkong newspaper added that this gorilla was "very hungry".

In the early 90s, China took 20% of the total foreign direct investment into East Asia (excluding Japan), while Asean absorbed 50%. Today, the numbers are reversed: China takes in 50% and Asean 20%. China is now dubbed⁴⁶ the "subcontractor of the world".

Even India is being flooded with cheap but good quality Chinese goods. Some Indian manufacturers are finding it hard to compete. So they have done the next best thing. They stick "Made in China" labels on their products to boost sales.

But China will soon be more than a sub-contractor. A July article in Asiaweek commented that: "It's not about cheap stuff any more. From PCs to chips to software, (China) is becoming an IT powerhouse."

Many Taiwanese companies are investing heavily in China, not just in low-end activities, but also high tech plants like wafer fabs. The companies are shifting their activities out of Taiwan into China. There are 200,000 Taiwanese businessmen in Shanghai and another 200,000 in Kunshan near Suzhou. The Taiwanese worry that their manufacturing industry is being hollowed out.

Richard Lim wrote an interesting article, entitled "A Wake-up Call from China", in the Sunday Times of 22 July. He has been to China several times over many years. He found China's transformation⁴⁷ to be:

"Alarming, because China's transformation will impact greatly on Singapore, especially on the livelihoods⁴⁸ of its less well-educated citizens."

He then urged that:

"The people must be made aware of what is happening, because their future, or their children's, is at stake."

Richard Lim's article attracted several letters. Many readers agreed with him.

I was, however, more than a little sad to read the response of a young reader, probably western-educated and had never been to China. He revealed that he had drafted his response with inputs⁴⁹ from a few others like himself, all 20-somethings. He wrote:

"We do not feel any affinity⁵⁰ to the Chinese people ... The cheena people are sucking away all the foreign investments and along with them, our jobs ... We really cannot imagine a world with the cheena people in charge.

The cheena people working in Singapore are really such a crude lot."

He ended sarcastically⁵¹ by asking Richard Lim to consider migrating to China.

This young man is unable to see beyond his nose. He needs to grow up, and quickly too. Perhaps he does not know that Chinese are called "Orang Cina" in Malay. If we are not Cina, what are we? "Ang Moh"?

I have been to China many times, the first time in 1971. I have seen China's transformation at close quarters. It is scary. You go to Beijing, Shanghai, Shenzhen, Dalian, Qingdao and scores of other cities, and you will be astonished by how quickly they have learnt and caught up. They write softwares for Microsoft. They are into life sciences and biomedical engineering. They have even succeeded in making their toilets at tourist attractions shinier and cleaner than ours.

Our biggest challenge is therefore to secure a niche⁵² for ourselves as China swamps the world with her high quality but cheaper products. China's economy is potentially ten times the size of Japan's. Just ask yourself: how does Singapore compete against ten postwar Japans, all industrialising and exporting to the world at the same time?

I do not mean that China will overpower every other economy, and grow at the expense of everybody else. As China develops and exports more, its imports will grow too. There will be many opportunities for other countries to trade with China, and for foreign companies to invest in China. We must grasp these opportunities.

But many of the things we are now doing, in time, China will do better and cheaper. We will have to stay one step ahead, and move on to new activities.

Singapore has a window of about ten years to make this transformation, and upgrade to the next level of economic development. But as we do so, we compete head-on with the developed economies. We have to match their level of innovative⁵³, scientific, technological and managerial capability.

VISION FOR SINGAPORE

We will need new energy, a clear sense of direction, a New Singapore, to compete in this new environment.

My vision is to turn Singapore into a global city, a 'globapolis', with people from all over the world and well connected to all parts of the globe - by air, sea, telecommunications and the Internet, in market access and investments, and in areas such as education, sports and the arts.

In New Singapore, there will be abundant opportunities for Singaporeans and global talent to work and do well. Our limited physical and market size will not constrain⁵⁴ us, for we would have expanded our economic space beyond our shores.

New Singapore will be one of the world's finest, most liveable cities. Arts, theatres, museums, music and sports will flourish. Singapore will be a lively and exciting place, with plenty to do and experience. Our city will not only have depth, but also the richness of diversity.

But above all, Singapore will be a home for Singaporeans. It will be the best home for us to raise our children, a warm and safe home with a good heart and sound values, and where strong bonds unite us as one family.

HOW DO WE GET THERE?

To create this New Singapore, we will implement⁵⁵ a new economic strategy and forge a new social compact. The new economic strategy will enable us to develop new bases of growth. The new social compact - an understanding among all Sihgaporeans, and between the Government and people - will ensure that we stay a cohesive⁵⁶ nation even as economic competition intensifies⁵⁷ and the income gap widens.

In this process of getting to the New Singapore, we will have to discard mindsets and old ways of doing things that have become irrelevant⁵⁸. We will have to learn new competencies.

But this is easier said than done

For example, 1 know many teachers in their 50s who have chosen to retire early. If they had stayed on, they would have had to learn many new things. They would have had to change 30 years of teaching materials, methods and routines for new ones. They would have had to struggle with their computers, and sometimes, get help from the students they are supposed to teach. They found such change stressful. So they chose to get off the treadmill⁵⁹.

As individuals, they could retire. But an entire country cannot quit. We have no choice but to run at the high speed of the global economic treadmill. Otherwise, we will be thrown off, and all Singaporeans will suffer.

NEW ECONOMIC STRATEGY

Singapore's growth up to now has primarily been investment-driven. This has taken our prosperity to an extraordinary level. But looking into the future, there are limits to how much more we can rely on such a strategy.

First, our wages and rentals are already higher than those in other countries competing for the same investments.

Secondly⁶⁰, there is an imbalance between our export sector, driven mainly by MNCs, and our domestic sector. Our export sector is competitive, but our domestic sector is not.

Thirdly, our exports are dominated by one industry - electronics. This makes us vulnerable to changes in external demand.

Fourthly, our immediate region is in a state of flux⁶¹, and will remain so for some years.

We need to respond to these challenges. Tonight, I would like to outline five key thrusts that will propel our new economic strategy.

First, be global. Reach out to new markets in our region and beyond.

Next, create an enterprising Singapore. We need more Singaporeans to strike out in business, and be more ready to take risks.

Thirdly, be more innovative. We should look for our own ideas, rather than merely copying the ideas of others.

Fourthly, restructure our economy, to make our export and domestic sectors⁶² more competitive.

And last, enlarge our pool of human capital and raise its quality.

REACHING OUT

First, reaching out to new markets.

7-HOUR HINTERLAND

The Asean region is important to us, especially Malaysia and Indonesia. But we should now widen our hinterland, to build up Singapore as a hub for the greater Asian region.

Within a 7~hour flight radius⁶³ of Singapore live 2.8 billion people, with hundreds of millions in the middle income group. We have only ourselves to blame if we do not fully¹ exploit these opportunities. We should regard all the countries and cities which are within 7 hours of flying time from Singapore as our hinterland.

China is within this greater hinterland. So is India, which also offers us good growth opportunities. India is opening up, though not as spectacularly as China. Its IT industry especially has developed remarkably⁶⁴ in the last few years. Indians living abroad are beginning to return to India, to start up companies there.

FREE TRADE AGREEMENTS

Our Free Trade Agreement or FTA strategy is part of our efforts to expand our economic space. Last year, we concluded an FTA with New Zealand. We are now negotiating FTAs with the US, Japan and Australia, among others.

FTAs open up foreign markets to companies in Singapore. This will benefit our companies, which must export to grow. FTAs will also attract more investments to Singapore, because factories in Singapore will be assured of enhanced access to important markets like the US and Japan. This means more and better jobs for Singaporeans.

In the last few months, the Malaysian media has portrayed⁶⁵ our FTAs as "Trojan Horses" that provide "backdoor" entry for goods from our FTA partners to enter the Asean market, through the Asean Free Trade Area or AFTA.

Our FTAs cannot be a "backdoor". Indeed, if it were possible for other countries to use Singapore's FTAs as a "backdoor" to enter the Asean market, then Malaysia could use the same "backdoor" to enter the markets of our FTA partners such as the US and Japan! But the rules of origin of AFTA and our FTAs will not allow this.

ENTERPRISING SINGAPORE

The second thrust of our new economic strategy is enterprise.

In the past, we bought and sold other people's products. Later, we added value to these goods. Then we attracted MNCs to manufacture here.

In the next phase of our development, Singaporeans have to be more entrepreneurial. We need to grow a group of local companies that can go international, to become international Singapore companies or ISCs. They will base their core capabilities in Singapore and expand outside. They will be another engine of growth for our economy, supplementing our foreign MNC strategy. I know we will not have many companies like Singapore Airlines, but we can have a few more like Creative Technology or PSA.

DEVELOPING SINGAPORE ENTERPRISES

We have some local companies with the potential to become ISCs, but we will need more.

Kwek Leng Beng

Kwek Leng Beng of the Hong Leong Group has turned his family-run company into a successful, professionally managed ISC. His hotel subsidiary owns or operates a portfolio⁶⁷ of 110 hotels with a total of 30,000 rooms, spanning Asia, Australia, New Zealand, Europe and the US.

Leng Beng is enterprising. When I was in London recently, he invited me to lunch at his about-to-be-opened restaurant in one of his hotels. He recounted the great trouble he had taken to persuade a Japanese-Australian chef from Sydney to set up this restaurant. Apparently⁶⁸, the chef's Sydney restaurant is very popular. You have to book a table two to three months ahead. Leng Beng spent two years wooing the chef before succeeding. Many other suitors had failed.

The chef is very particular. Everything must be exactly right. He delayed the opening of Leng Beng's restaurant by more than a month because he was not happy with the decor and service. He even checked the toilets and found them not up to his standard. Leng Beng had to redo the decor and the toilets.

The chef serves French-Japanese fusion⁶⁹ cuisine⁷⁰. We had eight courses. Each dish was exquisite⁷¹, beautifully presented and uniquely flavoured. After the eight courses though, 1 did not feel full like I would after a Chinese meal. When I described my experience to my Principal Private Secretary, he said, "Ah, the French call it, 'Menu Degustation'." He had studied in France. He explained that a 'Menu Degustation' was to allow you to enjoy different flavours and styles of preparation of many small dishes, and not to stuff you.

Sam Goi

Sam Goi of Tee Yih Jia is another enterprising Singaporean. Tee Yih Jia is the world's leading producer of popiah skins, and has the potential to become an ISC. Popiah skins may not seem a glamorous⁷² line of business to some of you, but I am proud of the inroads Sam has made in the international market. It could be the start of something much bigger.

From popiah skins, Sam went on to produce roti prata. 1 was surprised to learn that his roti prata sold better in the west than in the east. Somehow, he has managed to persuade Americans and Europeans to eat them, not with curry⁷³, but with chicken and salad like Mexican tortillas. Tortillas are like Chinese spring rolls. Sam did not stop there. He went on to identify a suitable frying pan for the roti prata. Now he sells both roti prata and roti prata frying pans.

Sam was in my delegation⁷⁴ to the Czech Republic. I teased him whether he had sold any popiah skins and roti prata to the Czechs. He laughed. He was not trying to sell them any. Instead, he was there to recruit a master beer brewer⁷⁵. 1 did not know that he had gone into the beer business and that he owned a brewery⁷⁶ in China. Sam explained that the Czechs were famous for their beers, particularly Pilsner beer. They have very good brewers. Sam did find a master brewer and was able to persuade the brewer to go to China to run his brewery.

We need more Sam Gois and Kwek Leng Bengs.

GOVERNMENT'S ROLE IN ENTERPRISING SINGAPORE

MTI is re-engineering TDB to widen its focus, from promoting trade to helping⁷⁷ Singapore-based companies internationalise and grow in the global market. In short, TDB will focus on growing Singapore's external wing.

That said, let's make this clear. The Government can help, and can create an environment that is conducive⁷⁸ to business and enterprise. But it cannot create successful businesses by decree. Indeed, to promote enterprise, the Government should intervene less, not more, in the market. A business which depends on the Government to protect its market or subsidise its operations, cannot be viable⁷⁹ in the long run. A successful business has to flourish in a free market. It must make a genuine profit by being more efficient and innovative than its competitors, and by producing something which its customers need, better and cheaper than others.

A RISK-TAKING CULTURE

Ultimately, how successful we are in creating an enterprising Singapore will depend on the risk-taking profile of Singaporeans.

Rewards for Success

The willingness to take risks depends on the economic and social environment. We should strengthen the incentives⁸¹ for people to venture forth⁸² in the hope of spectacular success, rather than to choose a safe path and minimise the risk of failure. Singaporeans have to discard the mindset of seeking secure jobs. Instead, we should also celebrate those who have the gumption⁸³ to try their hands at business.

We need to increase the rewards for success. A key requirement is to keep our tax rates as low as possible. One reason the US has a more entrepreneurial culture than Europe is that its tax rates are lower, so its people who build companies have more hope to become billionaires. In Europe, if your business prospers⁸⁴, 40% or more of the wealth that you create goes to the state in taxes. So the incentive⁸⁰ to take risks and slog hard to build a company is weaker.

Celebrating Success

Social attitudes too, affect how willing Singaporeans are to take risks. We should not resent businessmen who make it big. This is another difference between the US and Europe. In some European countries with strong egalitarian values, a person who becomes very rich is frowned upon by society, even if he has made his money honestly. But in the US, Steve Jobs and Bill Gates are folk heroes. Singapore is a more egalitarian society than the US. But we too should cheer on our entrepreneurs, so that they will create more wealth for themselves and for Singapore.

Accepting Failure

We have to change another attitude. We find it hard to accept failure. We do not give enough credit to those who try, fail and get up to try again. We should not look at this in terms of forgiveness and tolerance⁸⁵, but in terms of admiration⁸⁶ and respect for risk and enterprise, and resilience and tenacity⁸⁷ in the face of adversity and failure. Perhaps because of our dogged pursuit of excellence⁸⁸, or because we are such a small society that everyone knows everyone else, somebody who has failed finds it difficult to start afresh. But whatever the reason, we must give a second, a third and further chance to those who have failed, provided it was an honest failure.

INNOVATION

We need also to foster a culture of innovation. This is the third leg of our new economic strategy. Efficiency is important. But it can be easily matched by others, and does not provide a sustained advantage in competitiveness. In the globalised economy that permits rapid spread of technology at low cost, efficiency is only an entry-level requirement. Innovation and imagination give an economy or a company that extra edge. Today, wealth is generated by new ideas, more than by improving the ideas of others.

Sporadic⁸⁹ innovation by a few Singapore companies and the public sector is not good enough. The innovative spirit must permeate⁹⁰ our whole society. The question is how to create an environment that encourages many of us to become innovators.

By innovators, I mean a people whose minds are always looking for new ideas and new ways of doing things, not simply copying what others have invented. For this, we need non-conformist thinking.

Let me give you an example of non-conformist thinking. I happened to tune⁹¹ in to the BBC on the eve of National Day. There was an interview with a former American-Chinese TV presenter⁹² turned entrepreneur.

This lady entrepreneur has produced a range of cosmetic⁹³ products tailored for Asian women. She explained that Asian women have different features and different skin colouring, so cosmetics⁹⁴ meant for Caucasian women do not suit them. For example, when Asian women use a pink-based foundation, they look as if they are wearing a mask. Also, Caucasian women generally have more prominent noses, so their cosmetics seek to make their noses less prominent. On the other hand, Asian women generally have small noses, so they need to use cosmetics to make their noses more prominent. Otherwise, she said, 'You would not even see a nose on their face!'

This woman did not simply copy others. A conformist would have done that, and simply manufactured and sold western-based cosmetics in the Asian market. Instead, she thought out-of-the box, hoping to hit the jackpot.

I am also impressed by the innovative spirit of our National Library. It collaborated⁹⁵ with the private sector to design and develop a system to track the movement of library books, so as to cut down the time visitors spend queuing to check in and check out books. The books are implanted with a microchip which emits radio waves. To borrow a book, you put it on a pad at the self-check machines, and the book is registered as borrowed. There are hardly any more queues. Returning the book is also a breeze. You simply slide the book down a book-drop chute, and it is registered as returned.

Our National Library was the first library in the world to use this technology. It has patented the invention.

NATIONAL INNOVATION COUNCIL

Ironically, to change mindsets in our society, a top-down approach seems unavoidable. But I am clear in my mind that the Government can only stimulate⁹⁶ and encourage you to be innovative. It is not possible to direct and drive the population to become innovative.

Earlier this year, I invited Professor Gary Hamel, a management consultant⁹⁷, to conduct a seminar on innovation for Ministers and top civil servants. The seminar has generated some good ideas on how we can encourage a more innovative society.

I intend to set up a National Innovation Council to push along this change in the thinking of our people. Lim Hng Kiang, who is making several innovative changes in the Health Ministry⁹⁸, will chair this Council.

STRUCTURAL⁹⁹ ADJUSTMENT

Our fourth thrust is to make further structural adjustments to our economy.

OPENING UP

I have met people who have been personally affected¹⁰⁰ by our economic restructuring. Some are friends and relatives. Remisiers' commissions have been cut. Bank tellers¹⁰¹ are competing with insurance agents to sell insurance policies and unit trusts. Many bank employees are fearful of being retrenched¹⁰² because of banks merging¹⁰³.

I understand your distress¹⁰⁴ over the dismantling¹⁰⁵ of protective regimes. But I hope you will understand that the Government has to look at the larger picture. We have to consider the tectonic changes under way, and work out a strategic response to secure the long-term prosperity of Singaporeans.

The status quo is not sustainable. Even if the Government does nothing, the market will eventually bring about painful changes. We can delay the adjustment, but the final result will be worse. It is far better for us to accept reality and go with the forces of change, and not to resist them. If you watch boxing, you will know what I mean. The boxer¹⁰⁶ who sticks out his jaw¹⁰⁷ instead of rolling with the punch will be knocked out in no time.

EXPORT SECTOR

To restructure our economy, we have to enhance the competitiveness of both our export sector and our domestic sector.

Our export sector has been steadily¹⁰⁸ transformed over the years. We have shifted towards new, higher value-added manufacturing, as lower-end production moved offshore¹⁰⁹. 10 years ago, consumer electronics still accounted for 14% of our electronics production. Now, it is down to only 2%, having been replaced by the semiconductor¹¹⁰ industry. And the remaining 2% of consumer electronics is no longer radios or VCRs, but exciting new products like digital TV and DVD players. Soon, it will be wireless¹¹¹ applications that allow your home appliances to talk to one another.

We must accelerate the upgrading of our manufacturing sector, or we will be hollowed out. Our high tech industries must go even higher tech. For example, we must be able to produce more sophisticated semiconductors¹¹², and design the chips.

NEW CAPABILITIES

In addition, we have to build up new capabilities in IT, life sciences and other high value-added activities.

Life sciences, especially bio-medical sciences, are said to be the third technological revolution after the steam engine and the computer.

To give you an idea of the potential of life sciences, just look at the many different ways people make babies nowadays. Most make them in the usual way, the way married couples do. A few make babies in test tubes. Some use surrogate mothers. Now, I read that Australian researchers are trying to make babies from the cells of two women. They have shown that baby mice can be produced from the cells of female mice without any male contribution whatsoever¹¹³. If they succeed in applying this technology to humans, will our women still need us?

We must have a piece of the action, perhaps not in finding new ways of making babies, but in finding new cures for diseases.

DOMESTIC SECTOR

Even as we promote exports, we must not neglect our domestic sector. We should see how we can make the domestic sector as efficient as the export sector driven by MNCs. The productivity of our domestic sector, whether in construction or retail¹¹⁴ or hospitality, is low. This is a severe drag on our national productivity. If you have visited the developed countries, you would have noticed their superior service standards and productivity. Yes, there are outstanding exceptions in Singapore like Robinsons. But they are the exception rather than the rule.

Years ago, I took a taxi in Paris from the airport to the hotel. When the taxi arrived at the hotel, the driver got out and carried my heavy luggage out of the boot. I was astounded¹¹⁵. The driver was a woman.

Chong Lit Cheong, CEO of JTC, related that when he and his wife were in Hongkong recently, his wife had to pick up from a store, a bag she had already paid for. She telephoned the store to ask them to get her bag ready. The salesgirl not only got the bag ready, but went the extra mile. She waited outside at the taxi stand to hand the bag to Lit Cheong's wife, thus saving her the trouble of getting out of the taxi!

I would like to see such levels of customer service in Singapore.

When Professor Michael Porter was here earlier this month, he pointed¹¹⁶ out that unless our domestic sector was efficient, our overall economy could not achieve high productivity. Export businesses and consumers alike would have to pay higher costs for inefficient¹¹⁷ local services. He cited Japan as an example where a weak domestic sector had adversely¹¹⁸ affected the export sector.

We, therefore, have to open up our services sector further, to improve its efficiency. We are already doing this for finance, telecommunications and power generation.

At the same time, we will help our domestic sector to upgrade, especially the SMEs. PSB has programmes to improve their productivity. For example, for a long time, the cleaning industry suffered from low productivity and a poor image. Now, PSB is working with the industry to upgrade skills and performance standards. It has set up a Centre for Cleaning Technology.

There is also much room for retailers¹¹⁹ to upgrade themselves. Retailers should participate in PSB programmes such as franchising¹²⁰, economic grouping and shared services. These programmes help them adopt modern management practices and business models.

HUMAN CAPITAL

Our human resource is limited. We have to maximise our local potential and top it up from the outside. This is the fifth thrust of our new growth strategy.

EDUCATION

At last year's Rally, I pledged to increase spending on education by $1.5 billion a year (from 3.6% of GDP to 4.5%).

In particular, the Government will improve post-secondary education opportunities for our children.

First, ITE will regroup its current 10 campuses into three regional campuses over the next 15 years.

The larger campuses will allow a full range of courses to be offered, and provide opportunities for cross-disciplinary learning. Students can also look forward to better sports and recreational facilities.

The first new fully integrated campus will be ready by 2005.

Secondly, we have decided¹²¹ to build a fifth polytechnic¹²². It will open its doors in 2003.

Thirdly, we will build three new Junior Colleges in the next three years. This will bring the total number of Junior Colleges to 19.

Fourthly, we will expand the university sector. Today, one in five Primary One students eventually goes on to a local university. We aim to improve this to one in four by 2010. This means raising the current annual university intake¹²³ by 4,000 students.

But NUS and NTU are already as big as they should be. The Singapore Management University, or SMU, will increase its student intake till it reaches its target enrolment. Further expansion of NUS, NTU and SMU is not desirable. A committee headed by Peter Chen has offered preliminary ideas for a fourth university. I do not want to prejudge its recommendations, but in principle, I support a fourth university if its graduates can meet the standards demanded by the economy.

LIFELONG LEARNING

The Government will do more to enhance the skills of ordinary workers.

We have doubled the Lifelong Learning Fund from $500 million to $1 billion since April.

This year, the Government will give added emphasis to programmes to help older and lower-educated workers.

Executives, managers, engineers and other professionals may have to be retrained too, so that they can move into new growth areas. We shall study how this can be done.

GLOBAL TALENT

We can spend more on education and training. But the reality is that no matter how much we spend, with a population of just over three million, we will not have enough local talent to compete in the top league of nations.

Did you watch Team Singapore play Manchester United? If you did, you would have a good idea of the big gap between our standards and international standards. Team Singapore played well but it was no match for Man U because Man U was really an international and not a British team. Mah Bow Tan told me that about half the Man U team were non-British. He added that Man U was only playing at half pace. Otherwise, the score line might well have been 16-l!

A recent article by the newspaper, "The Australian", commented how corporate Singapore was controlled tightly by a small group of people. The same few Singaporeans are on the boards of many companies and Government Statutory Boards.

The journalist did not know the real reason. The truth is, we do not have enough corporate talent to draw on. Hence, so many demanding jobs fall on the shoulders of the same few people.

We have good local talent, but we need to top it up with global talent.

Others Are Recruiting Talent Too

We are not the only ones to have concluded that global talent is essential.

Australia recently enlarged its immigration programme to bring in about 45,000 skilled migrants a year. And Japan is finalising a blueprint¹²⁴ to import at least 30,000 IT professionals in the next five years.

The US economy has done immensely well because it enjoys a "brain gain" year after year.

For example, one quarter of the companies in Silicon¹²⁵ Valley are created by or led by Indian and Chinese immigrants. Also, since 1945, the US has won 60% (228) of all the Nobel Prizes in economics and the sciences. At least 30% of these economists and scientists were born outside the US.

Attracting Multi-National Talent

That is why we have to bring in multi-national talent, like the way we brought in MNCs.

Like MNCs, multi-national talent, or MNTs, will bring in new expertise¹²⁶, fresh ideas and global connections and perspectives. I believe that they will produce lasting¹²⁷ benefits for Singapore.

The competition for MNTs is intense. Just as we use incentives to attract MNCs, we may need to consider special measures to attract MNTs.

Retaining Singapore Talent

But the war for talent is not just about attracting foreigners. Retaining our own talent is going to prove a big challenge. Bright Singaporeans are being harvested by others even before they graduate.

Yeo Cheow Tong told me that JP Morgan, a leading Wall Street investment bank, recruited his daughter before she even started her final year in a top US university. Upon joining the bank after graduation, she was assigned to a corporate finance team that executes billion-dollar projects. Apart from the pay, such a first job excited and challenged her.

I asked Cheow Tong whether his daughter would come back to Singapore. He could only say, "I hope so." I hope so too.

I hope the daughter of Mr Abdul Rashid Gani, Managing Partner in the law firm of Khattar Wong & Partners, will come back too. She was one of the top students in Cornell University. During her final year, three top financial institutions in New York wooed her. They flew her to New York, put her up in first class hotels and took her out to fine restaurants. She is now working for Credit Suisse First Boston in New York.

Green harvesting of bright students is a common practice in America. It shows how hard top companies try to recruit top talent. We may lose many Singaporeans this way.

Other small countries face similar problems retaining talent. New Zealand is a good example. Many New Zealanders work overseas, in Australia, Britain or the US. So many New Zealanders have emigrated that newspapers write about "the flight of the Kiwis", even though Kiwis cannot fly.

Recently, an eminent professor from the London School of Economics, Professor Robert Wade¹²⁸, spoke at a conference in Auckland. He said:

"Once a threshold density¹²⁹ of skilled people is lost, the rate of out-migration is likely to accelerate, companies and organisations will have increasing trouble meeting staffing needs, the quality of public services will decline, the tax base will erode¹³⁰, and so on."

Professor Wade also spoke of how overseas Taiwanese and Koreans are offered considerable incentives and subsidies¹³¹ by their governments to return home. Even China is now doing this. How much more critical must it be for Singapore to attract talent from around the world and to retain our talent?

In the next few months, as our economy slows down and unemployment increases, some Singaporeans may again question the need for more global talent. I urge you to understand that this is a matter of life and death for us in the long term. Our own talent is being creamed off. If we do not top up our talent pool from outside, in 10 years' time, many of the high-valued jobs we do now will migrate to China and elsewhere, for lack of sufficient talent here. So it is better for us to anchor talents and jobs in Singaore, and make our importd talent feel welcome as part of the Singapore team.

SOCIAL AND POLITICAL ENVIRONMENT

We will create a social and political milieu¹³² which is conducive to our efforts to create an enterprising and innovative society. This means having the freedom to make personal choices, and to be different. Young people especially, often want to be non-conformist. We can accept that, within limits of decency¹³³ of decorum. We do not expect every Singaporean to dress and behave the same.

Beyond dressing¹³⁴ differently, many Singaporeans, in particular, the young, want to have more say in the way Singapore is run.

We have allowed freer expression of divergent political views, so long as this does not compromise law and order, national security and national interests. We have set up a Speakers Corner. Singaporeans have formed discussion groups like The Round Table and Think Centre to discuss political issues. In the spirit of discussion, the Government will from time to time disagree publicly with their views. It surely cannot automatically accept everything that they say, nor should it simply ignore what they say. If the Government thinks that something they said will hurt Singapore, it has to rebut¹³⁵ them, if necessary, forcefully.

But this should not be seen as the Government smothering¹³⁶ free expression. The Government will not regard you as an opponent unless you choose to be one. The Round Table is not an opponent. But the Think Centre is openly critical of the Government. It is one-sided in its presentation of articles and views, and the Government cannot ignore this.

I know some people want even greater freedom. But where politics is concerned, I prefer to ease up slowly rather than open up with a big bang. When Gorbachev opened up the Soviet¹³⁷ Union with his 'Glasnost', the Soviet Union collapsed¹³⁸ with a big bang. We should, therefore, pump the air into the political balloon slowly. I don't intend to change my name to 'Goh Ba Chev!

NEW SOCIAL COMPACT

In the New Economy, competition will become increasingly fierce, The pace of change can be unsettling.

The social framework we have developed to help those who cannot keep up is generally sound. But we need to improve it, so that we will hold together as a nation despite the more intense pace of life and the widening income gap. I want to outline here a new social compact for Singapore.

First, we will continue to subsidise heavily the three basic services of housing, education and healthcare. No Singaporean will be deprived of these three services no matter how poor he is.

Secondly, in years of good economic growth, we will distribute part of the budget surpluses back to Singaporeans, to enhance their assets as well as to help them defray essential expenses, such as their S&C and utility charges.

Thirdly, we will pay particular attention to the needs of lower-income Singaporeans. This is already being done for subsidies for basic services such as healthcare and housing. Also, last year, when we topped up your CPF, we gave lower-income Singaporeans more.

This policy of giving more to lower-income Singaporeans is right. The higherincome Singaporeans owe their success in part to the others who support our social compact. They must, therefore, be prepared to lend a helping hand to those among us who are not so well off. Only then can we remain a cohesive and stable society. It cannot be every man for himself. For a person to succeed, he needs a launch-pad from society.

In turn, lower-income Singaporeans must support the enterprise and efforts of those who have the ability. We must not resent those who create wealth, for themselves and for Singapore.

The Government, on its part, will ensure that every Singaporean has equal and maximum opportunity to advance himself, while providing a social safety net to prevent the minority who cannot cope, from failing through.

This way, we can have an enduring social compact where the able can do very well, and we can use some of the wealth generated by them to subsidise and help the less able.

CHARITY, PHILANTHROPY AND VOLUNTEERISM

But Singaporeans must not leave the task of helping the weak entirely¹³⁹ to the Government. If we are to build a cohesive society, individuals must form lasting ties with their larger community. To feel passionately¹⁴⁰ about Singapore is to care about more than just those things that directly affect our families, our friends, and ourselves. It is to be strongly committed to the wellbeing of our fellow Singaporeans, and to show compassion¹⁴¹ to those who are weaker than ourselves.

The Government will create an even more favourable¹⁴² environment for the involvement of the people and corporate sectors in charity, philanthropy and volunteerism. Among other initiatives, the Government will grant Institution of Public Character (IPC) status to private foundations that support charitable activities. I have also asked Richard Hu to consider giving increased tax deduction¹⁴³ for donations to IPCs, if possible, double tax deduction.

PRESERVING OUR RESERVES

Let me stress that my Government will carry out this social compact using budget surpluses that this Government has accumulated. I have no intention of dipping into our reserves, as Chiam See Tong has suggested the Government should do. Rather, my policy is to ensure that our reserves continue to grow year after year.

When some countries run into economic difficulty, they can pump more oil from their oil fields, or cut down more timber. We have no oil fields, no timber, no natural resources to fall back on. We can only depend on our reserves. They are our equivalent of "natural resources". As such, we must guard them zealously¹⁴⁴ for use only in a severe and prolonged crisis.

While our reserves are locked up, a proportion of the income from investing our reserves goes into our budget surplus. It is because we have protected these reserves in the past that we enjoy a comfortable budget surplus even during this current slowdown, which we can use to help Singaporeans cope with the slowdown.

Chiam See Tong argues that Singapore will not go bankrupt by using "a tiny fraction" of our reserves. This is a very seductive line. Seductive, but extremely dangerous for the people being seduced¹⁴⁵.

What he is arguing for is for us to slowly kill the goose which gives us golden eggs. First, pluck off some of its feathers to keep us warm. Next, since this does not kill the goose, Mr Chiam will suggest that we should slice off just one drumstick to ease our hunger.

My Government's philosophy, on the other hand, is to protect the precious goose - our reserves - and fatten¹⁴⁶ it. It will then lay golden eggs, some of which can be used to help Singaporeans during difficult times, and some kept for hatching more geese.

If we had followed Mr Chiam's advice to nibble¹⁴⁷ at our goose every time there is an economic downturn, we would have cooked our own goose by now. So I do not intend to dip into our reserves to tackle this current downturn.

RACE, LANGUAGE AND RELIGION

For an effective social compact, we need also a people that are bonded¹⁴⁸ to each other across race, language and religious lines.

Religious faith is a source of strength in a society. We can be good Christians¹⁴⁹, Buddhists¹⁵⁰, Muslims or Hindus and be patriotic¹⁵¹ Singaporeans at the same time. There is no contradiction between the two. But we should not change long-established practices that will lead to segregation¹⁵² between the races, or make it more difficult for any one community to integrate with the rest of our society.

Let me emphasise¹⁵³ that we want integration¹⁵⁴, not assimilation. Integration is a gradual, continuous process. We want to bond the different pieces of mosaic¹⁵⁵ together. Bonding is the result of mutual¹⁵⁶ trust and understanding. The process cannot be forced, because mutual trust and understanding cannot be forced.

HELPING THE LESS ABLE

Not everyone in the Singapore Mount Everest team made it to the summit. Only the stronger members did. However, the others gave critical back-up support from the lower camps. It was very much a team effort.

Likewise, in our society, not every one of us will become top income earners. But we must offer Singaporeans who fall behind a sense of hope, for themselves and especially for their children. Otherwise, they will become disaffected¹⁵⁷ and disenchanted, which will sour the social climate, and disrupt our economic progress. We will help every one of you go as high up as you can. And every Singaporean will share in and benefit from the team's success.

Indeed, the strength of a society is measured by the compassion and care its members have for each other. The members must know that if they are ever down, others will help them get up. If they cannot turn to the more able for help in adversity, then the bonds that hold us together will snap. Our society will disintegrate¹⁵⁸.

DISINCENTIVES TO WORK

In sharing the fruits of Singapore's growth, however, we must not inadvertently create disincentives for Singaporeans to take personal responsibility to fend¹⁵⁹ for themselves. Otherwise, we build up a crutch¹⁶⁰ mentality¹⁶¹, which will lead to indolence, dependence¹⁶² and abuse.

Heng Chee How, who will be our candidate in Jalan Besar GRC, told me this story.

When he was covering Hougang some years ago, he handed out cash to needy¹⁶³ constituents¹⁶⁴. He handed out $200 to a smartly dressed young man who had just lost his job. The man told Chee How, "You know, the $200 you gave me is not even enough to meet the mortgage payment on my car". Chee How said that he felt like punching the young man in the face.

Let me give you another example of how subsidies can be taken for granted - utility rebates.

In the last three years, HDB households have seen their monthly utility bills increase by about 25 to 35%.

There are two reasons for this. First, electricity tariffs¹⁶⁵ have gone up, because the world price of fuel oil used for power generation has nearly doubled. Secondly, Singaporeans are using more electricity.

Do you realise that if you turn on your air-conditioner every night, it will cost you about $23 a month? If you use water heaters instead of bathing in cold water, that will cost a family $15 extra a month in electricity.

We cannot cap electricity prices as some people have suggested. That would mean directly subsidising the consumption of electricity, and would lead to overconsumption. So we decided to help households, especially lower-income households, through rebates credited to their utility bills. This way, if households use less electricity, the rebate⁷ is still theirs to keep. Our approach was to help Singaporeans cope with increases in their utility bills while encouraging them to save and not over-consume.

I am, however, worried that utility rebates will be taken for granted. To illustrate¹⁶⁶ my point, after we introduced Utilities Save last year, do you know how many thank-you letters 1 received from the public? Only one! However, 1 receive many letters - of complaints on various issues. It shows that many Singaporeans take good government for granted!

I am concerned about the negative long-term effects of too comfortable a safety net on the attitude of Singaporeans. But in the new economic environment, we do need to do more to support lower-income Singaporeans. Hence, 1 am proposing the new social compact, after much deliberation. We need to strike a careful balance between helping lower-income Singaporeans, and not creating a dependency mentality among our people.

THE ELDERLY AND THE SINGLES

I have asked the Ministers to take a hard look at the key areas where groups of

Singaporeans need special attention.

One such group is our senior citizens. Their biggest concern is medical care. To address this concern, the Government will introduce three initiatives. These are: medical care for elderly Singaporeans suffering from chronic¹⁶⁷ ailments¹⁶⁸ such as diabetes¹⁶⁹ and high blood pressure; enhancing Medishield benefits; and a new "Eldershield" scheme to provide insurance against severe physical disabilities.

Lim Hng Kiang will announce the details of these initiatives later.

Another growing group of Singaporeans who require some attention are the singles. One of their main concerns is housing. HDB will now allow those aged⁶⁶ 35 and above to purchase resale 3-room flats in urban estates. HDB is also considering studio apartments, earlier conceived for elderly Singaporeans, as another housing option for singles.

CPF TOP-UP

At last year's Rally, I announced a CPF top-up of between $500 and $1,700 for each eligible¹⁷⁰ Singaporean, to be given out in two equal payments. The first payment was given in January this year. We will make the second payment in December.

I was told that 187,000 eligible Singaporeans missed out on the first payment. This is a pity.

I want to give these Singaporeans a second chance to qualify. If they contribute the minimum $100 to the CPF by 31 October, we will give them both the first and second payments for the CPF top-up.

"NEW SINGAPORE" SHARES

I would also like to introduce a new scheme to help especially less well-off Singaporeans. I intend to give you shares which pay a guaranteed dividend¹⁷¹ for a fixed¹⁷² number of years, plus bonus payments when the economy does well.

These shares will also be redeemable¹⁷³ immediately for cash, but not all at once.

I will call this scheme "New Singapore" Shares.

I know you are waiting to hear how much you will be given, but please be patient. How much to whom, and when, will depend on the state of the economy this year. I want to see the third quarter results before I decide.

CONCLUSION

For our growth strategy and social compact to be effective, Singapore must be cohesive as a nation.

As globalisation intensifies, this will become even more critical. More and more Singaporeans will go overseas to study, work and do business. We welcome this, but we must also find ways to keep their hearts here, so that wherever they are, they will feel emotionally tied to Singapore, stand up for it, and return one day to contribute to its growth.

Singaporeans must believe that the building of Singapore is an exciting enterprise. For Singapore to survive in the longer term, we must have a core of Singaporeans who feel passionately that this place is worth fighting for. To succeed, we must be proud of who we are, of our country and our fellow citizens. We must feel that together, we have created something precious that belongs to all Singaporeans.

Throughout world history, no country has remained rich forever. Countries go through a cycle where they are poor, grow prosperous and powerful, then start to decline.

We have become rich in one generation - a miracle perhaps - but too quickly and hence not deep-rooted enough. Will we decline in the next generation? My colleagues and I are determined that we will not. But we need this core of Singaporeans who feel passionately about our country. We need your support. In this climb up the mountain of economic development, we will equip you to tackle the next obstacle and to try for the summit. But we need also to pull our slower colleagues along, so that they too can go higher.

If we have the courage to confront problems instead of skirting them, if we are prepared to endure temporary hardships, and if we can adapt to change, we can continue to do better. This New Singapore - a global city with a strong social compact - is the Mount Everest we must achieve. We must succeed, so that our children can face tomorrow with optimism and confidence.