This is a happy day for all of us. Firstly, we are seeing strong economic growth as we celebrate this May Day. The last three May Day rallies took place during economic slowdowns. Secondly, our unions and workers now have a brand new home with a prestigious address. Why has this been possible?
The last few years have been hard on our workers. The external environment was unfavorable. We were hit by SARS. September 11 and the threat of terrorism affected our tourist earnings. These events coincided with the downturn in the global demand for electronic goods. Being a major producer of semi-conductors and disk drives, we were badly affected. The regional economies also did not grow strongly, reducing our economic activities as a hub.
Many workers lost their jobs. Professionals and managers too. In the first half of last year, 30,000 jobs were lost. I saw many union leaders with worried faces. Lim Boon Heng, too, wore his worries on his sleeve.
But we never lost our nerve. We knew that we would pull ourselves out of this bad patch. We reminded ourselves: when the going gets tough, the tough get going.
China and India on the Move
We moved swiftly and formed the Economic Restructuring Committee to get our economy going. This time, the economic slowdown was not just due to economic cycles. We could not just do nothing and wait for the tide to turn. Something more fundamental was happening. The kaleidoscope has turned and the picture changed. China has emerged as a global economic player. Some people described it as a giant vacuum cleaner, sucking in investments. Others say it is like a gigantic factory which produces all kinds of goods cheaply, in fact, cheaper than anyone else. Textiles, shoes, TV, white goods, garment – they flood the world market.
The Italians are famous for their silk ties. Now many silk ties are made in China but carry Italian brands.
Just as we are getting used to the competition from China, the kaleidoscope has turned again. India is on the move, at least in the IT sector.
I first went to India as Prime Minister in 1994. Prime Minister Narasimha Rao wanted to open up the Indian economy. But there was resistance from within his own Congress Party and other political parties. When I met their businessmen, I told them that India's protectionist economic strategy was wrong. India had a big population of 870 million people in 1994. They thought that this was a big market which they should keep for themselves. I asked them, politely, why a country of 870 million people should produce for only 870 million people? Why not produce for the world? They had talented people and good technical skills. They also had abundant labour. They can compete. Their Vice President, Mr K R Narayanan, to whom I posed the same question, agreed that India would be better off producing for the rest of the world.
Ten years later, India now has a population of 1 billion. It is eyeing the world market. It is opening up its economy to foreign investors and lowering tariffs for imported goods. India and Singapore are now negotiating an FTA. Ten years ago, that would be unthinkable.
Stephen Roach, Managing Director and Chief Economist of Morgan Stanley, is a long-time China watcher. Recently, he spent 4 days in India. He was excited by India's awakening. He wrote:
"India's strength is … in an extraordinary stock of human capital … What impressed me the most about India is a new sense of focus and determination. I have long been a big fan of China's remarkable accomplishments. India's awakening is equally impressive."
Now, it is like Singapore being in the ring doing battle with two heavyweight sumo wrestlers at the same time. Have you seen the advertisement of a scrawny man facing up to a big-sized sumo wrestler? Can you imagine small-built Singapore taking on two sumo wrestlers - China and India - at the same time? We will be squashed like a hamburger.
But will we? Why should we stand still and be squashed? Why must we wrestle with them? Why can't we use Tai Chi instead?
Those who watch kung fu movies may have heard of the Chinese martial arts stroke or "zhao" (?): "si liang bo qian jin" (? ? ? ? ?) - "use four taels to deflect a thousand pounds". Using this stroke, the Tai Chi master borrows the strength of the opponent to counter him.
Of course, we do not regard China and India as our opponents or think that we can defeat them. What I mean is that we should see China and India as opportunities and ride on their growth. We should borrow their strength and grow with them.
That is why we encourage Singaporeans to go regional. That is why we visit China and India frequently – to understand them, to work with them and to forge economic partnerships. China and India can provide the additional power for our economy.
We are already benefiting, not just from our investments in these two countries, but also from their investments in Singapore.
For instance, Singapore is becoming a launching pad for Chinese companies wanting to expand in the region and globally. Sinochem International, the listed arm of Sinochem Group, a very large Chinese conglomerate, has recently established its overseas headquarters in Singapore. This OHQ will manage all of Sinochem International's worldwide subsidiaries and businesses and also perform strategic planning and R & D.
India has rapidly emerged as the global hub for business process outsourcing. Recently, the Scandent Group – a big Indian company providing IT services and business process management – picked Singapore as the strategic base for its global operations. Why? Because Singapore is physically well-connected with the rest of the world through telecoms, air and sea links. Singapore is a base for over 6000 MNCs. We also have "connectivity" like FTAs with our major trading partners, close bilateral relations and a strong pool of human capital who understands international business practices.
Singapore's Core Strengths
So you see, we have many strengths. And one of our strengths is our ingenuity in overcoming problems.
But some Singaporeans do not see this. Because of the difficulties over the past few years, they felt a sense of hopelessness. Some even migrated.
Those who have migrated because they think the grass in Singapore is drying up will, one day, look back with regret. We will make our grass grow. No water for the grass? No problem. We have NeWater.
Aha! But you may say, ours is cow grass which nobody wants. Golfers know that we have replaced cow grass with xoysia and Bermuda grass! We can solve our problems and upgrade.
Those who are thinking of migrating should think again.
Do not think that the grass is always greener elsewhere. They may be greener now. But will they always stay green? All economies go through economic cycles. They may offer better prospects than Singapore now. But would it be always this way?
Besides, globalization is here to stay. Wherever you are, you now have to compete because the world is one global marketplace. You cannot escape from competition whether it comes from China, India, or other more competitive economies.
In the case of Singapore, each time our economy becomes less competitive because of rising costs, we have the capacity to reduce our costs. Not many countries can do that without social upheaval. We have cut our CPF twice before – during the 1986 recession and in 1999 in response to the Asian financial crisis. And last year, we made major changes to our CPF scheme to maintain our cost competitiveness. In addition, we restructured our tax regime. Our income tax rates, both personal and corporate, are among the lowest in the world. The Singapore dollar remains strong. It did not depreciate. In fact, it has strengthened against the regional currencies. Our exports continue to grow and current trade balance remains in surplus. And over the last 6 months, we have created 30,500 jobs – enough to replace all the jobs lost in the first half of 2003.
The developed countries do not have the same capacity to cut costs. Nor can they respond so swiftly. Why?
They do not have the same degree of harmonious tripartite relations that we have. This is another core strength of ours. During bad times, Singaporeans did not quarrel and fight over a shrinking economic pie. Instead, we bunched together like a rugby scrum and fought as a team. And together we grew the pie.
The trust between workers, employers and Government did not come by chance. It was carefully built up over more than four decades. We have a reputation for peaceful and co-operative industrial relations.
Last year, several thousands of workers were laid off. NTUC handled over 5,000 of those retrenchments from 107 companies. NTUC helped workers get a fair compensation package. They also helped workers retrain and find new jobs. Thanks to NTUC and enlightened employers, there was no industrial strife.
When PSA had to retrench 500 workers, the new Chairman, Stephen Lee, felt the pain. It was the first time PSA had to let go of so many staff. But it had no choice. It had to cut costs, reduce wages and increase productivity or see more shipping lines leave Singapore. PSA learnt its lesson from the loss of Maersk and Evergreen. It was not going to make the same mistake.
During the retrenchment exercise, the atmosphere was tense and emotional. The Industrial Relations Officer who handled this, Jessie Yeo, even cried. She was emotionally stressed. She wrote a report to Lim Boon Heng. Boon Heng was moved by it. He sent it to me to read to appreciate the contribution of union leaders and IROs.
PSA has regained its competitiveness because it took decisive actions. It restructured and changed its business model. Last year, it chalked up record container volumes, though not profits. It is confident of its future. It can beat back any competition. It has decided to build five new berths to meet the growth in demand for its services. That means jobs for Singaporeans.
The SIA pilots' dispute with management was a blessing in disguise. It alerted the Government as to what could go wrong in our harmonious industrial relations. It was not just SIA we were worried about. Or that we would lose our Changi's hub status if fewer airlines fly here. We were concerned that if the pilots broke our model of tripartite relations, other unions would follow suit. Then four decades of hard work in building trust and co-operation would begin to unwind.
SM sought my approval to handle the issue. He thought it was unfinished business left over from 1976 when the pilots took on SIA. He thought he had to crack heads. In the end, he found that the main problem was a lack of trust between the pilots and the management. He has put things right. I am sure that SIA is the better for it and workers will be rewarded when SIA flies high.
High Marks for Singapore
Investors and international analysts have noted the way we responded to crises. They have given us high marks. This is what the President and CEO of Honeywell Aerospace said about us:
"Singapore's highly-skilled workforce, strategic location and world-class infrastructure are compelling reasons for Honeywell to have a significant presence here. We are supportive of the ongoing efforts by the Singapore Government to enhance the country's global competitiveness as a centre of business. We believe the measures taken by the Singapore Government will help companies in Singapore and will benefit them in the long term."
In the Political and Economic Risk Consultancy's (PERC) annual Business Environment 2003 Report, Singapore climbed up from 3rd position, behind the US and Japan, to become the Number 1 place for doing business in the Asia-Pacific region. 2003 was the year we cut CPF and introduced other tough economic measures.
In the World Competitiveness Yearbook 2003, Singapore was assessed as the second most competitive economy amongst countries with populations of less than 20 million. Finland was first. Nokia is a Finnish company. I have visited its Head Office in Helsinki. I was impressed how a small country could produce a world-class company and telecommunications products.
These assessments by international agencies are worth millions of dollars in advertisements. In fact, if we were to take out an advertisement and boast how good we are, it would not be as effective. Everybody knows that the advertiser tells only the good features of the product, sometimes even exaggerating them.
But investors read independent, third party reports seriously. They know our reputation for doing things well and putting things right when they threaten to go wrong. Hence, despite the difficult conditions of 2003, we managed to attract $7.5 billion of fixed asset investments commitment in the manufacturing sector and nearly $2 billion of total business spending commitment in the service sector.
However, these figures are history. What of the future?
I am optimistic because of our strengths as a people. If you compare the competitiveness of countries, it is not just about size or even the abundance of natural resources. If land mass and population size are the overriding success factors, all the big countries would also be the richest. But this is not so. If natural resources are more important than people, then Saudi Arabia with its oil would be the richest country. It is not.
Countries with high per capita are those with high quality human resource and efficient organization, like the US and Japan for the bigger countries, and Denmark, Finland and Switzerland for the smaller countries.
We have high quality human resource. Now, 1 in 5 of every cohort of Singaporeans is admitted to our universities. 6 out of 10 Singaporeans make it to the polytechnic or university. And we are customizing our education system to maximize the potential and creativity of every Singaporean. Also, we are topping up our population with able people from China, India and elsewhere. If we have able people and we are more united and better organized than others, we can remain in the top rungs of the competitive ladder. The standard of living we enjoy will then continue to go up.
For those who do not make it to the polytechnic or university, do not fear. We run a competitive market economy where the more able will earn more. But we also run a compassionate social system where the wealth generated by the more able is shared with the rest of the population. Housing, education and healthcare services will always remain within your reach. And from time to time, when we have budget surpluses, we will share them with you, with the lower income Singaporeans getting more than the better-off Singaporeans.
And we will continue to pump in millions to upgrade your skills, to train and retrain you. We have set up the Workforce Development Agency (WDA) for this purpose. The WDA is managing a Lifelong Learning Endowment Fund of $1.5 billion dollars, with an annual interest income of $62 million. But you have to make the effort to upgrade yourself and learn new skills to prepare for the jobs in the future. I am glad that WDA has decided to set up its Headquarters and job placement office here. This makes it very convenient for workers.
A New Home for Unions and Workers
Today, we celebrate not just May Day but also the opening of this new home for NTUC and the unions. This new home is the fruit of the symbiotic relationship between the PAP and the workers as represented by their unions and NTUC.
The NTUC was formed 41 years ago or 9 years after the PAP. But we are brother organizations. We have the same objective – a better life for all. NTUC focuses on the workers while the PAP, as the Government, looks after the interests of all Singaporeans. Through good and bad times, workers and unions have strongly supported the PAP to make it the ruling party. The PAP, in turn, as the party which forms the government, ensures that NTUC has the resources to look after the workers.
The PAP is much, much poorer than the NTUC. It does not even own its own building. It leases office space in the HDB heartland. Why not rent space in One Marina Boulevard? The thought is tempting – to be near NTUC. But no, we cannot afford it.
For NTUC, the Government has given you a prime site and helped to fund the building because it wants to signal that the workers and unions are as important as managers and employers. Your building has a prestigious address. It is as handsome as those owned by big businesses. Its location in the heart of the city symbolizes the central role workers play in our economy. One Marina Boulevard is a fitting tribute to the NTUC, the unions and the workers for their contributions to Singapore.
Will NTUC be able to sustain its role in the economy and our society? Much will depend on the quality of its leadership. Just as the PAP is renewing its political leadership systematically, the NTUC and the unions must also plan for leadership renewal. Boon Heng has done a great job in NTUC. But he is getting on in years. He will be 60 in three years' time. He has asked me to post a Minister into NTUC to understudy him and later take over from him. I have decided to post Minister Lim Swee Say to NTUC. Boon Heng will not step down from his post for a while. He will stay on to fight the next General Election. This will give Swee Say two or three years to build up ties with you.
The opening of this new building could not have come at a better time. The economy is doing well and workers can look forward to a bright future.
I wish all workers many good years ahead.
