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Speech by Minister Mentor Lee Kuan Yew at the Tanjong Pagar 39^th National Day Celebration Dinner at the Tanjong Pagar Community Club on 20 August 2004 at 9.00 PM

The centre of economic gravity of the world is shifting from the Atlantic to the Pacific. China is becoming the economic powerhouse of the world, especially in manufacturing. The next 20/30  years the regions of highest growth will be China and India another powerhouse.  They will pull along East Asia and Singapore and Asean are situated between China and India.  They will add to our growth and also that of the US, Japan and the EU.

The world order is in flux.  But as long as there is a balance of power to ensure the region’s security and stability, we can grow and prosper, in spite of terrorist threats and the danger of conflict across the Taiwan Straits. But from time to time we have to respond swiftly to changes in the external environment, restructure our economy and move ahead. Recently, we had to reduce costs as the premium we enjoyed had to be trimmed because of changing technology and competition from lower cost countries – Malaysia and Thailand, and now bigger challenges from China and India.  We responded by increasing the variable component in wages, reducing CPF contributions for employers, cutting fees and taxes especially income tax, increasing GST by 2% and other measures that reduced our costs.

Because PSA did not respond fast enough, it lost Maersk and Evergreen.  Then PSA cut costs by wage reductions, backroom retrenchments and other measures to increase productivity. With a new management philosophy PSA is back in business and is expanding again.  They have lowered prices for their customers compared to two years ago. Since last year, their volumes are increasing – their profit levels are up again. With their flexi-wage structure, their workers have earned back their wage cuts and more from their bonuses for last year.

PSA has 5 new berths under construction and another 6 to 10 under planning. They are starting to hire port operators again, even though PSA had kept practically all their operators during the last retrenchment, losing only about 2% through natural attrition. The PSA workers themselves know this and are proactively working with management to serve their customers well. During the unexpected peak traffic in June this year, they volunteered to come back in their off days to help.

After seeing what happened at PSA and saddled with the dismal outlook during SARS, SIA acted before their losses got worse. It cut costs, retrenched poor performing staff, increased productivity and is profitable again, helped by the bounce back after SARS.   Other airlines start to cut staff costs sharply by as much as 30-40%, especially US airlines when they face bankruptcy.  We should learn from them, and restructure our wage system before we are forced to do so by irrecoverable losses. 

Of course SIA is different from PSA.  SIA serves many individual customers and will not face a situation where they will be shocked by the loss of customers en bloc.  Instead, they are more likely to face the danger of a frog in water on the boil.  A frog in cold water that is gradually being heated up, will not realise it is being cooked until it is too late.  SIA has not yet felt the full impact of new regional air hubs, or new big long haul Airbus A380 and smaller point to point Boeing 7E7, and competition from many more low cost carriers.  It may take many months for SIA to reposition itself ahead of competition from Valuair, Tiger Airlines, Jetstar Asia and many others.  There are also several younger long haul airlines out there, all eager to overtake SIA and eat its lunch. SIA cannot afford to let up in its efforts to become more competitive, cut costs and yet satisfy customers’ expectations for premium quality.

If we take proactive steps Singapore will remain as an air hub, increase the number of the airlines and aircraft, passengers and cargo that will go through Changi, and so create greater demand for pilots, cabin crew, and ground handling and catering staff, whatever may be the impact on SIA and its subsidiaries as a result of unrestrained competition. To stay in business the SIA Group must face these challenges, not wait until forced to, when it will be too late.

NOL also is looking up after its restructuring, having pruned costs and sold off its non core assets like its tanker fleet.  It is now a leaner organisation with a management team focused on its core business, and the flexibility to move swiftly to meet changing market conditions. But NOL has to prepare for stiffer competition as the major shipping lines are consolidating through mergers and acquisitions and buying larger container vessels. The way ahead is rough but NOL can compete against the big boys if management and workers are prepared for tough measures to stay in the top league.

Because we have met the competition head on, we will make 8-9% growth this year.   MTI’s forecast for 2005 is 3-5% growth. The macro economic conditions for growth in East Asia are very good. Now and again Singapore will be challenged by new players, often with improved infrastructure and the latest technology.   An average growth of 4-6% for the next decade is sustainable.

The unanimous forecast of the IMF, World Bank, and ADB for East and South Asia is that it is the fastest growing region in the world.  Singapore is situated between China and India and will be pulled up by these two huge engines.  We also have FTAs and CEPAs with US, Japan, Australia and New Zealand, and later China and India. Had Singapore been situated in Africa, a region plagued with conflicts and mired in instability, its prospects would be dismal. Then no country would have want an FTA or CEPA with us.

If I were young in my 20s, Singapore is one of the best places to be in.  I can get a good education, a solid foundation for life to do best in life.  Whether I am Singaporean  Chinese,  Malay, Indian or whatever, I can get a first rate education, enjoy excellent health services, good and affordable housing and have a safe environment to bring up children. I can maximise my opportunities by learning English as my first language, keep as much of my Chinese as I can, and learn Malay as my third language so that I can understand what people in Indonesia and Malaysia are saying on TV and the press. Because English is my master language my   Mandarin can never be equal to that of China’s Putonghua , nor do I want to become like one of   China’s Chinese . Then my value-add to any China-Chinese joint venture is zero. With 1300 million Chinese they do not need another Chinese. It is because I am a Singaporean Chinese with world-wide connections with Americans, Europeans, Japanese, Indians, Asean and other peoples, who all use English as the first or second language, so I can add value in any cooperative enterprise with China-Chinese. What I need is enough command of Mandarin and understanding of present day Chinese culture to work easily and comfortably with them. And with Singapore as my home, the world is my oyster, for I can afford to travel anywhere in the world for leisure or business.

Singapore is connected with all the major business hubs for flows of trade, investments, capital, technology and human expertise.  Under a stable international order, a small country has advantages.  We can chart our course for the benefit of 4 million Singaporeans, unlike Hong Kong where way  to the future is decided  by China to advance  the overall interests of  not only 7 million Hong Kongers but also 1,300 million Mainlanders.  In China there is fierce competition for every job and for every promotion.  When Hong Kong’s 50 years is up in 2047, they will face the same competition.  Every Chinese has to compete with hundreds of equally or better qualified people for any job or promotion.  In Singapore you are one out of 4 million, whereas in China you are one out of 1,300 million.  In Singapore you can get your MP’s and government’s attention to attend to your difficulties.

For the next few decades, the US is a virtual American empire.  Whether you are African or South American or Indian or Filipino or Chinese or Korean, etc, Americans will let you work for them in America and in their MNCs abroad. Of course you will not be the social equal of the whites.

Throughout history all empires that succeeded had embraced and included in their midst people of other races, languages, religions and cultures, provided they are prepared to fit into mainstream America.  This was so in ancient Rome, Han China, Austro-Hungarian, the British or French or Russian empires.  Rome was once such a centre of the then known universe.  It prospered and talent flowed into Rome.

The world has never been so open to travel with national borders so porous. This has resulted in massive flows of people across national borders, both legally and illegally. Singapore has a Chinese majority, but whatever your race if you join us as citizens, we accord you equal rights and equal opportunities. This is why we have been able to have considerable inflows of skilled and educated Chinese, Indians, Europeans, and others. Because Singapore is an open cosmopolitan society that accepts and welcomes talent, so we have continued to thrive and prosper.

You are better placed than your fathers: better educated, able to use English and your mother tongue. Singapore is now a brand name for integrity, efficiency, transparency, consistency and resourcefulness.

But what my generation has is that fire in the belly. We knew war and enemy occupation. We have experienced fear, hunger and hardship, the terrors of communist insurgency, of communal riots and bloodshed. These trials and tribulations have steeled us for life. 

But your generation has also gone through some rough passages - the Asian financial crisis of 1997-2001, pressure from Indonesia under President Habibie who in 1999 warned us that we are a little red dot; and several difficult years with Malaysia under Dr Mahathir. And you suffered the shock of discovering JI suicide bombers in Singapore in December 2001; recession because of the Iraq war of March 2003; and SARS also in 2003.  You have been toughened by setbacks.

What you need is ambition, the determination and the dare to climb up to greater heights.

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Tonight, the CCC will be conferring the “Friends of Tanjong Pagar” Award to Mr Leong Chun Loong, who served a total of 30 years, 23 years as Tanjong Pagar CCC Chairman and Mr Michael Kan, who served a total of 19 years, 10 years as CCMC Chairman.  They have both helped me run the constituency for many years.  I and the residents of Tanjong Pagar are much obliged to them.

Source: Singapore Government Press Release 20 Aug 2004