Speech by SMS Zainul at Second Conference on "Globalisation and Economic Sucess: Policy Options for Africa", Cairo

Minister of Finance, His Excellency Dr Youssef Boutros-Ghali, Minister of Trade and Industry, His Excellency Mr Rachid Mohamed Rachid,

Excellencies,

Ladies and Gentlemen

It is indeed an honour to be invited to address the Second Conference on "Globalisation and Economic Success: Policy Options for Africa". At last year's inaugural conference in Singapore, delegates sought the key reasons for economic success and failure in the contemporary era of globalisation and assessed the lessons from the "Washington consensus" reforms. It is no coincidence that Egypt has been chosen to host this year's meeting. Over the years, Egyptian leaders have made notable efforts to meet the challenges of globalisation through economic and social reforms, most notably the privatisation of state-owned enterprises. For example, the recent sale of an 80% stake in the Bank of Alexandria to Sanpaolo Bank of Italy made news around the world. Of course, reforms have not always been smooth-sailing for Egypt or any other country. But often, as national leaders, we have to be prepared to ask our people to bite the bullet and take the bitter medicine for the long-term benefit of our respective countries.

2 Likewise, Singapore also places our long-term national interest above short-term changes disruptions which may often be painful for our people. As a small country with no natural resources, the embracement of globalisation and free trade is a necessity, not a choice. The 2006 Index of Economic Freedom by the Heritage Foundation ranked Singapore as the second most open economy in the world, just after Hongkong. Depending on how it is managed, economic openness could either be an asset or liability. As a small economy, we cannot simply sit back and say, "Yes, we've found the secret to success" and assume that our good fortunes will perpetuate for the next 100 years. Change is a constant in this world. While we cannot control our external environment, we can decide how to adjust to it. Constant self-reinvention is therefore a necessity for Singapore. Only by doing so, can we remain relevant to the rest of the world. Let me elaborate.

Reinventing Singapore

3 Over the past forty years, Singapore's economic prosperity has been aided by our geographic location. Located along the key shipping lanes, we have exploited our location to become a key trading, air, finance and business hub in Asia. China, Japan, India and Southeast Asia are all within a seven-hour flight radius of Changi airport. From Singapore, you can service a combined population of over 3 billion people. That is why more than 7,000 MNCs have chosen to hub in Singapore. But in the age of advance Infocommunications and transportation technology, distance matters less. Occupying the right economic space is now more important than being located in any particular geographical place. How then do we encourage MNCs to remain in Singapore, especially when our land and labour are relatively more expensive location? The answer lies in our ability to value add.

4 Singapore has long realised that moving up the value chain is critical to stay ahead in the manufacturing game. It was inevitable that manufacturing companies would relocate to less expensive locations in the region. With abundant land and 1.3 billion people, it is inevitable that China has become the factory of the world. Singapore has managed to retain manufacturing as a contributor of 25% of our GDP. We achieved this by moving up the value-chain to focus more on R&D work, and high value added industries. For example, Dell's design centre in Singapore is responsible for R&D development of all its displays and imaging products. About 20 new Dell products are developed in Singapore every year. To demonstrate our commitment to bolster our R&D capabilities, the Singapore Government has sought to raise Singapore's GDP expenditure on R&D to 3 percent by 2010. Recently, we have also established the Research, Innovation and Enterprise Council to advise the Government on research and innovation strategies. We also formed a National Research Foundation to fund long-term research in strategic areas. These initiatives send a strong signal to foreign investors. Singapore is serious about R&D. We are prepared to put money in it.
5 The development of skilled manpower in Singapore did not happen overnight. Since independence in 1965, we have strongly believed that a highly-educated population was critical to our survival. Every year, about 20% of our budget is set aside for education. When the government tightened public expenditure a few years ago, the Education Ministry was one of only two ministries that were exempted from mandatory budget cuts. Recently, I read that even some schools in the US have adopted our mathematics curriculum. This is truly a rare tribute to us. While we place emphasis on basic education, we have also not ignored higher education. Apart from our three local universities which have achieved commendable international rankings, we have also attracted world-class universities to offer programmes or even establish campuses in Singapore. MIT, Harvard, University of Chicago, INSEAD are some examples. Our long-term aim is to turn Singapore into an international schoolhouse where students, both local and foreign, can interact and learn from one another. In doing so, we hope that our own children will be given the opportunity to learn from and study alongside the brightest scholars in our region.

6 Another way Singapore has reinvented itself has been to constantly review policies to reassess their relevance. Tourism is a good example. Unlike Egypt which has an illustrious histories and world renown tourist attractions, Singapore has none. So we must be prepared to change with the times and develop new products to meet the demands of modern tourists. You may have read of our recent decision to develop two integrated resorts (IRs) which would include casinos alongside world class restaurants annd entertainment facilities. This was not an easy decision. As a muslim leader, I neither gamble nor encourage it. But I also recognise the economic benefits of the proposed integrated resorts. Religious groups such as the Christians and Muslims were opposed to such an idea. However, after considering all factors, we decided to proceed. We realised that Singapore would not be alone. Other countries such as Malaysia and Tunisia with even more Muslims also had casinos. Of course, we introduced the necessary laws and other measures to mitgate the negative influences of gambling. The point is that in Singapore, there is no cow that is too sacred to be slaughtered if the circumstances warrant it.

7 In a globalised world, Singapore cannot afford not to tap economic opportunities in markets outside its immediate neighbourhood or region. In the 1990s, the government encouraged our companies to adopt a regional approach. Given the small size of our domestic economy, companies were urged to expand and establish themselves in the region including China, India and Southeast Asia. Many of them have done well. Our historical and cultural linkages with the region have given our businessmen an advantage in understanding the business culture and practices of the Asian markets. However, with globalisation forcing companies to compete aggressively, there is no reason why Singapore businesses should limit themselves to the region. The Singapore brandname of efficiency and commitment to excellence is globally known. While markets in distant lands may be unfamiliar, our businessmen have been able to ride on Singapore's well-established reputation to gain footholds. In recent years, a number of Singaporean companies have made forays into the Middle East and Africa. In Egypt for example, our companies have built a prominent presence in the port and maritime industries. For example, Portek Systems, is upgrading and modernising a quay crane at Port Said at the mouth of the Suez Canal.

Fundamentals Remain Unchanged

8 I have given you some examples of how Singapore has reinvented itself. But let me assure you that some fundamentals will not change. First, good governance. A clean and competent government is a pre-requisite for Singapore's survival and prosperity. Foreign investors do business with Singapore because they know that the Government is competent, clean and transparent. Once Singapore's reputation is compromised, it will be a slippery slope downhill.

9 Second, meritocracy. Singapore has built its society on the premise that one's achievements in life are based on his own ability and talent and not who he is related to or knows. The child of a street hawker or taxi-driver has the same chance of winning a government scholarship as that of a child of a businessman or doctor. Everyone compete on the basis of merit. There is no discrimination on the basis of race or religion. This system has served us well. Apart from motivating Singaporeans to strive and do their best without expecting handouts from the government, meritocracy also assures foreign investors that they can bid for projects not on the basis of patronage but on merit.

10 Third, the maintenance of religious and racial harmony. As a multi-religious and multi-racial society, Singapore places a premium on promoting harmony and stability. Our approach has not been to assimilate all races into one but to promote harmony within our diversity. All the major religious holidays are celebrated as national holidays. We enjoy freedom of religion and the languages of the four racial groups are enshrined in the Constitution as official languages. Our approach has been to expand the common space between the communities in order to encourage greater interaction between the races and to forge a common national identity that would transcend religious and racial backgrounds. Children of all races and backgrounds interact with each other in our schools. Singaporean men of all races serve compulsory national service together in the military, civil defence or police at the age of 18.

Conclusion

11 Let me conclude. I do not presume that Singapore's model of development is replicable in every country because of different historical and developmental circumstances. However, I hope that some of the principles that have guided Singapore's policies may help shed some light on how we have responded to the challenges of globalisation. Singapore itself is always learning from others. And I hope to learn from my friends and colleagues present here today during the Conference.

12 Thank you.

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