FrontPage 22 Aug 2000 More (Part One)

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^{Prime Minister's National Day Rally Speech}

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PART ONE OF THREE PARTS

4 In Malaysia, UMNO is facing a stronger challenge from the opposition, Parti
Islam or PAS. It also has to meet the expectations of a younger and more vocal generation of Malaysians. Dr Mahathir has said that this is his last term as Prime Minister. The political landscape after Dr Mahathir may be different,
though the Barisan Nasional and Malaysia's well-established institutions will
provide continuity, and not discontinuity like in Indonesia.
5 In Taiwan, the election of Chen Shui-bian as President has created a new and complex situation for Beijing. Both sides of the straits are now sizing up
each other as they manoeuvre over the one-China issue. How this issue is
managed will affect not only China and Taiwan, but the stability of the whole
of Asia.

New Economic Landscape
6 The economic landscape is changing even more rapidly.
7 Northeast Asia is pulling ahead of Southeast Asia. China will become an even more formidable competitor for markets and investments after her entry into the WTO. Korea has already become much more competitive because of the reforms it undertook following the Asian financial crisis. Japan's economy too, is turning around.
8 Southeast Asia, on the other hand, has been slow to shake off the effects of
the financial crisis. In many countries, structural reforms have been mired in
political difficulties. Progress has been moderate at best. There are also
doubts about ASEAN's cohesiveness, and its resolve to press on with the
integration of its markets.
9 I fear that the income divide between Northeast and Southeast Asia will widen considerably in the years ahead.
10 Globalisation is also driving many changes in the economic landscape.
Wherever you are, and whatever you do, you now compete in the global arena, for skills, talent, investments and markets.
11 In addition, huge technological advances have powered knowledge
breakthroughs in many fields. Scientists have cloned sheep. They have mapped the human genome. They may not clone human beings, for ethical and religious reasons. But we can expect genetically-enhanced humans. Singaporeans may, in future, hope to live beyond 100. But pause for a moment and think. You may then have to work till you are 80!

Period of Change
12 These changes are not incremental. They are discontinuous. This makes
working out strategies for tomorrow difficult, as we cannot depend on yesterday's experience.
13 To succeed in an environment of rapid and abrupt change, we will have to be
more versatile, and more ready than ever to adapt.
14 This is the Japanese dilemma. Its highly successful model of economic
development now appears to be a liability in the New Economy.    It is finding
it difficult to change with the Internet world.
15 The spirit of change in America, on the other hand, is palpable. America's
corporations are flexible and dynamic. They hire and fire, merge and downsize, and emphasise quarterly bottom-line and shareholder value. Mind you, these same values were criticised as American weaknesses in the Old Economy. But these same values are now in vogue.
16 Singapore has to embark on its own journey of change, or be left behind.
Our current formula for economic development may well become less effective in future.
17 For example, Changi Airport has established itself as an aviation hub in
Southeast Asia. But new technologies may threaten Changi's position. Existing commercial aircraft cannot fly non-stop from Australia to the UK. They must stop somewhere to refuel, and many choose Singapore. But the new Airbus A340-500 which will come into service by 2002 will be able to fly non-stop from Perth to London. And it won't be long before Boeing or Airbus builds a new aeroplane that can fly Sydney-London non-stop. Then we will need compelling reasons for air traffic between Australia and the UK to stop over and hub in Singapore.
18 With the world changing radically, it cannot be business as usual for us.
We have to reinvent ourselves. We have to go beyond being efficient and
productive, to create and attract new enterprises.
19 This is not simply a matter of promoting new growth areas. For example, we have identified IT and life sciences as two new industries that will help drive
our future growth. But so have many other countries. These new growth areas
which we want to move into are already crowded with competitors.
20 So we need to differentiate ourselves. We need to find a fresh approach to
doing things that will set us apart from the crowd.

Insurgents vs Incumbents
21 Recently, I met Professor Gary Hamel, a well-known management consultant. He was here to carry out speaking engagements for our public service officers.
22 Professor Hamel characterised competition between companies as a battle
between insurgents and incumbents, that is, between the revolutionaries and the established corporations.
23 He said and I quote,
"In the new industrial order, the battle lines don't run between regions and
countries. It is no longer Japan versus the United States versus the European
Union versus the developing world. Today, it's the insurgents versus the
incumbents, the revolutionaries versus the landed gentry. ( First the
revolutionaries will take your markets and your customers.   ( Next they'll
take your best employees. (. Finally, they'll take your assets."
24 In the fight between SingTel and Richard Li's Pacific Cyberworks to take
over Hong Kong Tel, SingTel and Hong Kong Tel were incumbents. Pacific
Cyberworks was the insurgent, the newcomer to the industry. The insurgent won, helped by the sentiments of the Hong Kong people.
25 I am glad, though, that SingTel has moved on. It can and will turn itself
into an insurgent, to win other battles against future rivals.
26 We can apply the same concept of insurgents versus incumbents to Singapore as a nation. With success, we are in danger of thinking and acting like an incumbent. This metaphor of insurgents versus incumbents may be
oversimplifying the nature of competition, but it is a vivid way to warn
against complacency. I believe that there is a real risk that because of our
past success, we expect the current formula to continue working for us.
27 I asked Professor Hamel what would be the best term to describe Singapore's drive to reinvent itself for the New Economy. Professor Hamel said that his preferred term was "grey-haired revolutionary".
28 I immediately thought of Senior Minister. He is a grey-haired
revolutionary. He pushed Singapore to go regional. He pushed Singapore to go cashless. He encouraged me to pay Ministers and public sector officers a
market-based salary.
29 But I don't like to think of Singapore as grey-haired. We are still a young
country.
30 The point, however, is that in the next decade, we need to think and act
like revolutionaries. We have to innovate, not merely imitate. We will
succeed not by following the footsteps of the incumbent, but by introducing new dimensions into play.
31 Innovation does not only mean making new scientific discoveries or new
inventions. It is also about insights into how to use other people's
discoveries, knowledge and inventions to produce new wealth, or how to do
things in a radically different but better way. Some innovations ride on
technology, many others do not.
32 Take Creative Technology's Sim Wong Hoo. He has not only pioneered
technological innovations, but is also exploring new business concepts.
33 I had lunch with him recently. He showed me his latest innovation, the
Nomad Jukebox. It is a handheld digital audio player that can store up to 2000
songs. It will hit the stores soon.
34 But Sim Wong Hoo is already working on the next range of Nomad Jukebox which will operate on a totally new business concept. He plans to tie up with a
record company to distribute the Jukebox with thousands of songs pre-stored in it. The owner of the Jukebox can listen to any of these songs by paying a few cents each time. If he likes one of the songs, he can simply push a button on the Jukebox to buy it for say, a dollar a song, through a micro-payment device in the Jukebox. Then he can listen to the song as often as he likes. The
Jukebox is in effect a virtual music library with a stored value card which can
be topped up through the Internet.
35 We have other innovators, like Ong Peng Tsin of Interwoven, whose product
powers renowned e-business web-sites such as Cisco Systems, General Electric and Xerox. There is also Jason Lim who was involved in ThirdVoice, the inventor of "sticky notes" for the Web.
36 But we do not have enough of them.

Strikers, not Goalkeepers
37 Employees in Singapore are not given enough incentives to take risks and be enterprising. If they fail, they may be sacked. But if they succeed, and earn or save their companies millions of dollars, all they may get is a small
bonus. So most employees tend to be goalkeepers. Instead of venturing new
ideas, they concentrate on not making mistakes. They plod on thinking that
their jobs will be safe so long as they stay on the trodden path.
38 But this will not work in the future. Goalkeepers, important as they are, do
not score goals. And unless you score goals, you cannot win against the
insurgents out there. If our companies fail to rise above incumbency, we may
soon find ourselves with no team left to keep goal for. Employees must
therefore be rewarded to think and play like strikers.
39 We need more Singaporeans who are willing to take a shot at goal. We must go beyond adding value to MNCs' products and services. We must ourselves create new products and services.
40 As a country, we also have to play like a striker. Encouraging our
companies to go regional, for example, has its risks. Some companies have lost money. But on the whole, it has been very positive for our companies and
economy.
41 Focussing on IT seems like a safer bet than, say, life sciences, because it
is less capital intensive. In life sciences, you spend millions of dollars on
research trying to discover a drug with a killer application, but there is no
guarantee you will find it. Or others may beat you to it.
42 Nevertheless, we have decided to take a risk on life sciences because of its
huge potential. Also, if we can gather and concentrate talent here, we will
entrench an advantage which others will find difficult to dislodge. It is an
area that requires brainpower more than muscle, and brainpower will create much more wealth than brawn this century.
43 Let me give you an example. Take the Mercedes Benz 200E class. A pound of the car sells for US$19. And there is already much knowledge embodied in the design and production of the car. Guess what a pound of the blue pill - Viagra - sells for? US$12,000! As they say, it is all in the mind.

People And Mindset
44 The basis of success in the New Economy will be people and their mindsets.
We need a change in mindset to deal with the new challenges. We need
Singaporeans who can lead the way in creating new wealth for our economy.
45 Our priority in the coming years will therefore be to maximise the
innovative and entrepreneurial spirit of our people. We have to change
national and individual mindsets and attune them to a very different future.
Only then can we succeed against other insurgents and incumbents.
46 But let me be clear.   When I speak of transforming Singapore to join the
New Economy, I do not mean embracing only new sectors such as dotcoms and e-commerce. I am referring also to the remodelling of traditional sectors,
such as manufacturing and retailing, into entities which can succeed in the New Economy.
47 Likewise, being an insurgent does not guarantee victory, and being an
incumbent does not necessarily mean failure. In fact, the current problems of
Amazon.com and the collapse of Boo.com show that the jury is still out on who will inherit the New Economy. Old Economy incumbents who adopt New Economy thinking may often be in a stronger position to win. They may not be as sexy in the stock exchange but they have solid top and bottom lines.
48 My main point is that we need a mindset change to succeed in the New
Economy. We need New Economy thinking, to exploit our Old Economy strengths.
We cannot be a complacent incumbent merely keeping goal.

Widening Income Gap
49 As we transform our economy and forge ahead, some Singaporeans will do
better than others.
50 The Straits Times started a debate on the widening income gap in Singapore when it headlined an article on Singapore's distribution of income: "Low-income group hardest hit by recession"
51 It showed a picture of a cleaner with a quote: "I survive on $133 a month".
52 This might have been an eye-catching caption, but it was misleading. It
gave a wrong impression that the cleaner earned only $133 a month, and had to survive on that amount. In fact, cleaners earn an average of $850 a month.
53 $133 was the average income for the bottom 10% of households, because many households in this group had no members working. Some were retirees, living on their CPF savings. Others were unemployed, in between jobs. But nobody works as a cleaner in Singapore for $133 per month, or $5 per day.
54 Are our lowest-income Singaporeans so poor and desperate as the Straits
Times story made them out to be?
55 Two-thirds of the bottom 10% households are home owners. Many of them own TV sets, washing machines and telephones, the basic consumer items that typical Singaporeans are accustomed to. When we compare their asset profiles to the bottom 10% in developed countries like the US, UK or Australia, ours are no worse off.
56 The fact is, the bottom 10% in Singapore enjoy a modest but reasonable
standard of living. Like other Singaporeans, they have benefited from the
country,s progress.
57 But yes, the income gap in Singapore is widening. This, however, is because of globalisation and the knowledge revolution, which have enhanced the value of talent dramatically, and pressed down the wages of the unskilled.
58 The market for talent is now totally international. Employers know that
their best employees may be headhunted and may even move to another country, taking with them their knowledge, contacts and even colleagues. So pay must take into account the competitors in the market outside, and the premium for talent in the New Economy.
59 The income gap is widening in other countries too. I looked at 27 countries
in Asia, Europe, North and South America. 22 out of the 27 have seen their
income gap widen. They include Hong Kong, China, India, UK, US, Canada and Mexico.
60 The income gap in the US is now reported to be at its widest since data were collected in 1977. The ratio of top executives, to factory workers, pay had increased 10-fold, from 42 times in 1980 to 419 times in 1998.
61 The question is: what can and should the Government do about the widening income gap?
62 Should we forcibly hold down the wages of those at the top? If we do, we
will kill the incentive for enterprising people to innovate, to take risks, to
make it big, and in the process create many new jobs and move the whole economy forward. Top talent, Singaporeans and foreigners, will move to other countries where they can get better pay. Singapore will become less competitive. The standard of living of the remaining Singaporeans, who have no choice but to stay here, will be dragged down.
63 Can we artificially up the wages of those at the bottom? If we try,
companies will simply relocate to lower-cost countries.
64 Already, many Singaporeans are worth more than a hundred million dollars.
Several hundred professionals and corporate leaders earn more than a million
dollars a year. Would I like every Singaporean to be just as rich? Sure I
would. But it is simply not achievable. If we introduce policies to force an
equal society, we will end up being equally poor. Other societies have tried
and failed. Socialist Europe lags behind the US in economic development, in
part, I believe, because of their stronger emphasis on social equality.
Societies which try too hard to equalise the incomes of their people invariably
reduce the incentives for their people to better themselves. Why should they
when the fruits of their labour will be taken away and distributed to others?
65 President Zedillo of Mexico shares my view. A journalist asked him whether he thought wealth in Mexico should be spread more evenly.
66 He replied, "They are confused. You don't get better income distribution by taking from one and giving to another. You get better income distribution by empowering people to have the capacity to share the benefits of development. (   The wealth will be better distributed as long as we are successful and continue to invest heavily in education, health, and programs against extreme poverty."
67 We must not envy those who have made it rich. Rather, we must provide the opportunities for more to be like them. It means operating on the basis of
meritocracy - that you can get ahead in life if you work hard, and regardless
of your background. It means providing all our children a sound education and
our workers training and re-training, so that they have the means to seize the
economic opportunities offered to them.
68 But we must also recognise that, indeed, there will be some Singaporeans who have genuine difficulties. We have programmes to improve the standard of living of this lower-income group, along with the rest of the population. We also
have special programmes to help them, to ensure that they and their children
enjoy good housing, proper health care and a sound education.

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