Suppose we are all on a tour in some other country. Somewhere in the countryside, a small fallen tree blocks the road. Our tour bus cannot get through. If we do nothing, the tree will remain there for a long, long time. We will not get to the next scenic spot. What will we do? Do we say to the driver and the tour guide: I paid $1,000 for the tour, so it is the responsibility of the tour company to remove the tree? Do we say: You promised in your brochure that we would have a comfortable journey, you never said I have to push trees, so I am just going to stay in the bus and wait. Or do we say to the other passengers, let's get down, push the tree aside, and move on?
Since our last TDC 3 years ago, we have seen much ups and downs. The economy grew strongly in 2000, reaching a growth rate of 9.9%, but this did not last long. Last year, we went into a recession. The economy shrank by 2.2%. Retrenchments increased, job creation fell, and unemployment crept up. This year, the economy has picked up. MTI estimates we will see 2- 4% growth. But retrenchments continue to be carried out as companies restructure and relocate out of Singapore. Job creation has not gone up to previous levels yet.
On our journey towards economic growth, some trees have fallen across our path. Other economies in the world are also badly affected by the same winds of change. We read in the newspapers how Argentina's economy has collapsed, how close Turkey is to a crisis, how thousands of jobs are lost in Mexico, Hong Kong and Taiwan as companies relocate to China.
We also read about massive strikes in Italy and Korea. The workers there are objecting to attempts by the governments to make the labour laws more flexible. We hear about the trade unions in Britain and Australia breaking up with the Labour parties, which are their traditional partners, because of differences in approach to employment issues. Germany, Ireland and other developed are lowering their taxes to attract more investments.
The governments in so many countries are making attempts to solve their unemployment problems. What we see now is a global tug-of-war for jobs, investments and business. It is going to be a tough struggle.
In our part of the world, foreign direct investments flow was 80% to ASEAN and 10% to China 20 years ago. 10 years ago, it was about 50-50. Now it is about 70% to China and 20% to ASEAN. Much of the investments into ASEAN came to Singapore. So we have to work so much harder and smarter for the new investments coming in.
Our neighbouring countries are also keen to take some of our core businesses away from us. With cheaper labour and more land, they have a cost advantage. We cannot sit still and carry on in the same way as in the past. What worked before may not be effective anymore. We have to re-examine our systems, our methods, our laws and our strategies, and revamp them if necessary to meet the new challenges.
The Economic Review Committee is tasked with drawing up the new strategies. It has issue two sets of recommendations, one on tax changes and the other on refocusing the use of CPF. Both are fundamental to the new strategy to create jobs and protect the long-term interests of our workers.
When the tax changes were announced, some union leaders asked how effective they would be to create new jobs. It was of course impossible to tell at that time how many new businesses would be attracted into Singapore. But I have one small piece of good news. Last week, I had a discussion with a businessman from France. He is based in Singapore, and looks after the business in the region. His company does a lot of business, but while he makes the deals, the actual business is done out of other countries. So the other countries get the jobs and collect the taxes from the profits. But because of our tax changes, this businessman told me he is seriously considering doing more business out of Singapore. This will mean more jobs for us, and more tax collection from his company.
I am sure there are more businessmen already thinking like him. Our tax changes were a step in the right direction.
The CPF changes were also necessary to give our workforce sufficient retirement income, good quality basic housing, and enough savings for medical care. They strengthen our social safety net. Union leaders in our many dialogue sessions questioned the wisdom of freezing the CPF contribution for older workers. They were worried about their ability to service mortgages and the reduction to overall savings. But while union leaders felt that it would have been better not to have a freeze, they know from first hand experience that older workers are most vulnerable in a retrenchment exercise, and they have a hard time getting a new job after being retrenched. And this trend is unlikely to be reversed.
But like passengers in our tour bus, sometimes all of us have to get down together and remove the fallen trees that get in our way. Some may be cut by the branches, some may be poked by the thorns. But by removing the obstacles to our attractiveness and competitive edge, we make our path ahead that much smoother.
Employers too must do their part. The ERC took into account the feedback from unions, and recommended that employers should give back the savings from the reduced contribution back to deserving workers affected by the freeze. I am glad that one of the companies SISEU is associated with - Singapore Technologies - has announced straight-away that it will give the savings from the CPF freeze back to the workers. The Government will give a Transitional CPF Top-up Component to affect civil servants. This is most heartening.
Other companies should follow these good examples. I call on all the companies unionised by SISEU, and indeed all the companies in Singapore,
In the past 3 years, SISEU has achieved much. The Exco will give you a report, so I will not steal the limelight from them. The new Exco you will elect this afternoon will continue the good work. They will have much to do. The challenges grow more difficult as the global competition increases. I wish you a successful new term ahead.
