01 Aug 2002
My Fellow Singaporeans,
Five years after the Asian financial crisis, Southeast Asia has still not fully recovered from the resultant political and economic setbacks. Singapore's economy was also dragged down during the crisis. But because we had no foreign debts and our banks were well managed, we have recovered faster. We made 10% growth in the year 2000.
However, just a year later, our economy went into recession. The US economy had stalled, and the global electronics industry nosedived. The September 11 terrorist attacks further slowed down the US economy. Then in December last year, we uncovered the Jemaah Islamiyah terrorist group. Fortunately, we caught them before they could execute their plan to set off truck bombs in Singapore. Indeed, these have been trying times. The world has changed dramatically. America's war is now against terrorism, not communism. Russia, an old enemy of the US, is now a friend, a member of the G8, and soon also of the WTO. China and most of Eastern Europe are already in the WTO. The competition for investments and markets will be intense. We have to act now to meet the challenges of this new world. We are making significant changes to tax and CPF policies, and other aspects of our economy as well. We must remake Singapore so that in the long-term, we can continue to:
achieve growth of 4 to 6% annually;
create jobs for the people;
raise the income of Singaporeans;
and keep the cost of living stable.
First, economic growth.
Prospects are brighter now than a year ago. The global electronics industry has bottomed out. In Asia, political and economic stability are improving. The Japanese economy is beginning to stir. Though the US dollar has weakened, and the US stock market has dropped sharply, the US economy should still see modest growth this year.
Our economy has done well so far. In the second quarter, it grew by 3.9%, bringing growth in the first half to 1.2%. MTI has raised this year's GDP growth forecast to between 3 and 4%.
Investment commitments are healthy. EDB expects to attract some 9 billion dollars worth of quality investments this year. MNCs invest in Singapore because of our strong fundamentals. They have confidence that our Government and people will take hard decisions for the good of the economy.
Looking beyond this year, we do have concerns: what if the US' economic recovery falters? What if there is another major terrorist attack? We cannot rule out these possibilities. They would affect the global economy, and Singapore as well.
We are now more like a developed economy. Therefore, we cannot expect to grow as rapidly as in the past. But over the medium term, we should be able to make 4-6% growth on average, provided the US economy stays resilient and the global environment remains stable.
Through the Economic Review Committee, we are gathering ideas from a broad range of Singaporeans on how to upgrade and grow our economy.
We are moving to higher-skilled, higher value-added activities, like larger wafer-fabs, IT and biotechnology. We are developing new service industries like education and healthcare, where our standards are well regarded and give us a competitive edge. And we are crafting new strategies to grow existing services like transport and logistics, tourism and finance.
We must keep improving efficiency and productivity, and get companies, including shipping lines and airlines, to continue to hub in Singapore.
These and other strategies will help us to respond to China's growing economic strength, and to compete against others like Korea and Taiwan.
Although our economy is recovering, it will take a few months for unemployment to come down.
My big worry is structural unemployment. Many of the jobs that older Singaporeans used to do are gone. Companies are relocating their simple assembly line factories to China and other low-wage countries. We are creating new jobs, but these are different types of job, and require different capabilities. Factories producing silicon chips, fine chemicals and pharmaceutical drugs need skilled workers and engineers. Hospitals need nurses, laboratory technicians and doctors. These jobs need special knowledge and skills. That is why the NTUC has been encouraging workers, especially older workers, to retrain and upgrade themselves.
There are many other jobs which older Singaporeans can also do. Factories find it difficult to recruit Singaporeans for such jobs, and need to rely on foreign workers. Employers report that local workers are reluctant to travel a little further, and to work shifts.
Singaporeans should be more flexible and adaptable. It is better to be gainfully employed, than to remain unemployed for long periods in the hope of finding the perfect job, which may never come.
Our present income levels and standard of living are already high. With the economy growing less quickly in future, we must expect wages to go up more slowly too. But so long as we keep up with the changes around us, and so long as we welcome talent and investments, we will be able to continue to enjoy wage increases.
Last year, wages went up by 2.3%. This year, we expect wages to increase by up to 2%. We will continue to improve the lives of Singaporeans year by year.
Cost of Living
Finally, the Government will keep the cost of living stable, by promoting competition and maintaining a stable value for the Singapore dollar.
This does not mean that prices will never go up. For a free market economy to work, when costs change, prices have to change too. Companies have to make profits, or they will close down. Price increases in goods and services are part of the adjustment process. To delay unavoidable adjustments will only make the pain worse in future.
I understand your anxiety over higher electricity tariffs, bus and MRT fares. Fortunately, prices of many other items, like rice, household durables and housing, have not gone up. Also, the Economic Restructuring Shares will help Singaporeans cope with the GST and other increases.
Overall, we expect inflation this year to be close to zero. With wages likely to go up, most Singaporeans will enjoy a small increase in real income.
The challenges are formidable. However, the bigger the problems, the stronger our resolve must be to face them head on, get on top of them, and move forward.
We have good reasons to be confident. We are pulling out of our recession sooner than we had expected. We must press on to adapt ourselves to the new world, to survive and grow amidst new uncertainties and dangers. And we must encourage an innovative and entrepreneurial spirit, so that more Singaporeans will start businesses and create opportunities for ourselves, even as we attract more MNCs to invest here.
This is the way towards a more vibrant Singapore. Let us put our hearts and minds to it, and together, achieve our goals.
Happy National Day!