Global City, Best Home

COMPETITION IN THE NEW GLOBAL ENVIRONMENT

1. You have done well for Singapore. Our economy is healthy. We are taking steps to make Singapore the best home for you. Tonight, I want to look beyond immediate problems, and paint for you the broader picture of global competition. This is to better prepare ourselves for the new environment.

2. We face competition from our ASEAN neighbours, China and the NIEs. For key sectors of our economy, like finance and banking, and SIA, the issue is not just a few new competitors in the region, but a new global competitive environment. Globalisation and technology are transforming these industries world-wide. We must be alive to these developments, because they affect us fundamentally.

Malaysia

3. Malaysia is striving to get ahead. It has Vision 2020. It aims to be a developed country by 2020. It is pursuing many ambitious projects, developing Port Klang, building a new Kuala Lumpur International Airport, and promoting the Multimedia Super Corridor. These are areas where Singapore has traditionally done well.

Thailand

4. Thailand, like Malaysia, is pushing forward aggressively. It presently faces serious economic problems. These will take some time to resolve. But Thailand's longer term potential is still considerable.

5. During my recent trip to Thailand, I visited the Eastern Seaboard, south of Bangkok. I had expected to see a struggling industrial estate. But it is already well developed, with a petro-chemical plant, an automotive industry which will be the biggest in South-east Asia, and other heavy and light industries in operation. It reminded me of Jurong, except much bigger.

6. Thailand is also developing a big container port at Laem Chabang near Pattaya on the Eastern Seaboard. Laem Chabang will replace Bangkok port, which is a river port. But it will also compete with Singapore as a transhipment port.

7. Thailand has also quietly planned a multi-media zone at the Eastern Seaboard. The Thais claim that it is even bigger than Malaysia's Multimedia Super Corridor.

The Philippines

8. The Philippines too has got into the cyber act. It is promoting the former Clark Air Base as a cyber city, as well as for light industry, aviation and tourism. President Ramos has also promoted investments elsewhere with some success. Subic Bay has become a booming freeport zone. Federal Express has made Subic its Asian air hub, whereas DHL has made Singapore its South East Asia hub. Japanese electronics firms like Fujitsu have set up hard disk plants in Subic. They want to compete against Singapore, which has many US hard disk makers like Seagate and IBM.

China

9. Further afield, China will be a formidable economic player. I have visited many Chinese cities and provinces. They will be enterprising competitors. Their governors, party secretaries and mayors are very much on the ball and promotion minded. They roll out the red carpet, organise briefings complete with multi-media presentations, offer you land, and persuade you to invest, just like our EDB.

10. Dalian's mayor, Mr Bo Xilai, is a very energetic and persuasive promoter. I met him in Dalian this April. After singing the strengths of Dalian, he crooned that Dalian has another irresistible attraction: the beauties of Dalian. He said, if you have not been to Dalian, you will not realise that you had married too early.

11. A Singapore consortium is building an industrial park in Suzhou. When I visited Suzhou recently, the Singaporeans there told me that they faced stiff competition from a Chinese-developed industrial park just next door, in the Suzhou New District. In fact the New District has set up a Web site on the Internet, both in English and Chinese. But besides the New District, there are countless industrial parks all over China, many aspiring to be like Singapore. Once they are like Singapore, they will compete like Singapore.

12. However, I discovered that Suzhou Industrial Park also has one irresistible attraction, at least for Singaporeans. The food court there offers chicken rice, bak kut teh, curry chicken, and Tiger beer. It is run by a group of enterprising shopkeepers and stall-holders from Marine Parade. The special dining rooms are named Mountbatten, Geylang Serai, Marine Parade and after other wards in Marine Parade GRC.

Financial Services

13. In financial services, the competition comes not just from one or two other countries, but is global.

14. We have been highly successful in developing Singapore as a financial centre. We are one of the largest funding centres in Asia via our Asian dollar market. Our foreign exchange market is the fourth largest in the world. Fund management activities in Singapore have also grown rapidly.

15. However, the financial industry worldwide is undergoing a major transformation. Financial markets are globalising. Trading takes place round the clock, shifting from time zone to time zone as the sun sets in Tokyo, Hong Kong, Singapore, London, New York, Chicago. Movements in the Dow Jones index immediately affect share prices in Asia and Europe. Capital shifts rapidly from one continent to another, seeking the highest return and lowest risk. Banks and other financial institutions are merging, restructuring, cutting overheads, seeking economies of scale, and delivering new products and services, all to serve customers better. The driving forces are globalisation, new information technologies, and declining costs of computing and telecommunications.

16. In our time zone, there will be 3 or at most 4 major financial centres. Japan will reform and liberalise its financial market with a Big Bang by the Year 2001. This may give us some additional business. Japanese institutions will move more funds offshore in search of better returns. Some will be managed out of Singapore. But because the Japanese market is so big, many foreign firms would expand their operations in Japan.

17. We cannot compete against Tokyo across the board. But we must identify niches where we have a role to play, and can complement Tokyo. We do have one big advantage over Tokyo - English is our working language. Our cost of doing business is also lower.

18. Hong Kong also has a vibrant financial sector. We are ahead of Hong Kong in some areas, but behind in others. But with China as its hinterland, Hong Kong is a major centre for raising funds for projects in China. Hong Kong also has a larger critical mass of local and foreign talent than ours - bankers, accountants, lawyers, fund managers, all the complementary skills a financial centre needs to thrive.

19. In the longer term, Shanghai will be another key financial centre, just as it was before the war. Chinese Vice Premier Zhu Rongji wants both Hong Kong and Shanghai to thrive. In other words, China will build up Shanghai. This will take some years, because Shanghai needs to build up the expertise, the rule of law, the reputation and confidence. But the Chinese are determined to get there.

20. How do we make sure that Singapore will be among the top financial centres in this region? We have to re-examine our strategy for developing the sector, which has been so successful up to now. Which parts are still valid? What needs to be changed? How do we do better, while maintaining our strengths - prudent regulation, strong financial institutions, transparent and efficient financial markets, and investor protection? There are no ready answers, but we are studying this issue closely.

SIA

21. SIA is another good example of the challenge facing Singapore. In a very apt way, SIA epitomises both our nation's success, as well as the competitive situation which we face today.

22. But SIA cannot afford to rest on its laurels. Other airlines have taken bold and creative steps to cut costs, upgrade their fleets, and improve service levels.

23. On United Airlines, for example, frequent fliers travelling from Singapore to Tokyo are served New Asia cuisine from Raffles Hotel's Doc Cheng's restaurant. United is confident that this will be a strong attraction to food-loving Asian travellers.

24. British Airways has become one of the strongest airlines in the world. It was single-minded in restructuring itself to become competitive. Over the last four years, it has reduced costs by £740 million through strategic alliances with other airlines and outsourcing of services like catering. This year, it announced a pre-tax profit of £640 million, a dramatic turnaround from massive deficits in earlier years.

25. But BA still thinks it has not gone far enough to cut costs. It wants to go through another round of restructuring, and change pay and working conditions for cabin crews. But the cabin crew did not support this. In July, they went on a three-day strike. And even after the strike was officially over, crew reported sick in large numbers, forcing BA to cancel many flights.

26. The strike has cost British Airways £125 million. Worse, it has harmed the good image which BA had painstakingly built up. But the strike also shows how important BA management considered the restructuring to be. They decided to go ahead with the changes, even though they knew that this might well provoke a strike. The objective was so vital that they could not afford to compromise. And I am sure they will press on after this strike to make BA more competitive.

27. BA was doing well. BA management therefore found it difficult to convince the workers that changes in pay and working conditions were necessary. SIA is in the same situation. Yet SIA's future will not be easy. Airline deregulation and sharper competition have kept airfares down. In fact, airfares adjusted for inflation have fallen by a third since 1978, while costs have gone up, especially staff costs.

28. Furthermore, SIA finds it increasingly difficult to recruit cabin crew of the same quality as before. More Singaporeans are going to polytechnics and universities. SIA has fewer suitable candidates to choose from. So the Singapore Girls now include girls from Malaysia, India, China, Japan, and even Europe.

29. Charles Chong, an SIA engineer and MP for Pasir Ris GRC, says that when he travels by SIA, he knows immediately which girls are Malaysians and which Singaporeans. The Malaysians fold blankets better. They do it at home, whereas the Singaporeans get maids to do it for them.

30. To cut costs, SIA has shifted some of its work to cheaper locations - like software development in Madras and aircraft maintenance in Xiamen. This is the painless bit. Further cuts will be harder.

31. SIA management will have to maintain a close relationship with union leaders and workers as it restructures. The airline is a service business. SIA must not only save costs, but also maintain and improve on the quality service on which it has built its reputation. It cannot do this without the wholehearted support of its staff. And it will be disastrous for both SIA and Singapore if SIA lets its standards slip below other airlines, or is grounded because of poor industrial relations. Singapore's reputation world-wide will be severely damaged. This is why I asked Lim Boon Heng to go onto the SIA board of directors. He has a very difficult and crucial job.

GLOBALISATION AND DISPERSION, ABSENCE OF ROOTS

32. Globalisation creates another difficulty for us. In a very mobile world, more Singaporeans will go abroad to work. Singapore communities overseas will grow. Recently, I was in New York. I met 200 Singaporeans at a reception organised by our Ambassador. They were undergraduates from top universities, graduates doing higher degrees, doctors, bankers and Singaporeans working for Government-linked companies. Most are transients, studying or on postings of varying lengths. But some have been there for a long time.

33. In Hong Kong, there are about 9,000 Singaporeans. About half have been living there for more than 7 years and are classified by Hong Kong Immigration as permanent residents. There are also sizeable Singapore communities in other cities - Sydney, Perth, London, Paris, Tokyo, Beijing, Bangkok, Manila.

34. Singaporeans have a good reputation. We are known to be generally competent, disciplined, hardworking and trustworthy.

35. When MNCs start up operations or expand in China, they often hire in Singapore. American companies target Singaporeans studying in universities in America, not just MBAs or post-graduate students, but even under-graduates. They want them for their projects in East Asia, especially China. Some of our scholars in the US were recruited even before they graduated. An increasing number break their bonds, because the offers by their new employers are so attractive as to be irresistible.

36. This is a real problem. Many of our best now contribute to others' economies instead of returning to Singapore. They do this permanently, not temporarily. It might be alright if we had large numbers of such people to spare. But we have no surplus talent. They should be thinking and worrying about Singapore's future, making it safer and more prosperous for their fellow Singaporeans. Instead, they are thinking, worrying and creating wealth for foreign companies and themselves. This is not a criticism but a recognition of a new fact of life. It is a facet of globalisation and regionalisation that we need to reflect on and address.

37. In a way, we have encouraged this dispersal of Singaporeans by asking you to go regional and create Singapore's external wing. But dispersal carries a danger - if Singaporeans are not deeply rooted to Singapore through strong bonds of family, friends, community and nation, the core of our nation will unravel.

38. Abiding bonds to family and friends and deep loyalties to Singapore are crucial in this new situation. We must never forget that Singaporeans owe one another an obligation, and the more able ones, in whom Singapore has invested the most, have a special obligation to society. We must all join hands to keep Singapore together.

RESPONDING TO THE CHALLENGES

39. How should Singapore respond to the competition and globalisation? There are countless cities the size of Singapore in Asia. But there is only one Singapore. If we do not rise to the challenge, we will be just another city of 3 million, whose existence goes unnoticed unless some earthquake or typhoon briefly puts it on TV news.

Maintaining Sound Policies

40. The first strategy is to pursue sound fiscal policies. We must live within our means, and be prudent in our spending. Fortunately we have. Each year the budget has shown a surplus. Richard Hu has been in the happy position of reducing taxes and sharing part of our surpluses in all sorts of asset enhancement programmes. When Ministers ask Richard Hu for money, he never says "no" because he has not enough funds. It will be because of other reasons.

41. Thailand's recent economic problems hold lessons for us. Thailand borrowed too much from abroad, in US dollars. But not all the money was invested in productive projects. Much went to finance a property boom. When exports slowed down and the property bubble burst, Thailand found itself in serious economic difficulties. Many financial institutions became insolvent. To date, the Bank of Thailand has suspended 58 ailing finance companies. The Thai Baht came under pressure. Investors lost confidence. The IMF had to be called in to work out a package of stringent economic policies and restore confidence.

42. The Baht was floated on 2 July. It went down by 14% against the US dollar that day. Since then it has depreciated another 16%. The Baht devaluation had a spillover effect on the other currencies in the region - what the Thais called the "tom yam" effect. Since the Baht's float, the Philippine Peso fell by 11%, the Indonesian Rupiah fell by 10%, and the Malaysian Ringgit fell by 9%. Even the Singapore Dollar depreciated by 5% (all as at 22 August).

43. But the financial markets knew that not all Asian currencies were the same. As the AWSJ reported: "The picture varies markedly from country to country. Some, such as Singapore, appear to be relatively healthy and to have survived the crisis more or less unscathed; … Others … are struggling to deal with asset bubbles and weak banking systems that may yet run into serious trouble. But they took on less total debt than Thailand, and had more of the direct foreign investment crucial to increasing productivity." [AWSJ 6 August].

44. Our sound monetary and fiscal policies have given us this firm foundation for a stable economy. We have avoided populist, "spend and spend" welfare policies and budget deficits. We have carefully ensured that our banks do not lend beyond prudent limits. And we have kept a rein on the property sector. Looking back, we did right to take measures in May last year to cool the private property market before the speculation got out of hand. And we did right not to succumb to pressure and overbuild HDB flats just to satisfy the long queue.

45. Had we overbuilt, banks would have become over-exposed to the property sector, and the eventual inevitable correction would have been much more painful. The Singapore dollar would have gone down much more.

Gathering Talent

46. Our second strategy to meet future competition is to gather talent and make Singapore a cosmopolitan city. Singapore has prospered because we have attracted talent from all over the world, especially the region. This is how cities like London, New York, Hong Kong, and Shanghai (before the War) became successful.

47. The most recent example is Silicon Valley. Silicon Valley could not have become the vibrant and dynamic centre for new startups and exciting ventures, just based on the population of Palo Alto, California, or even the whole of America. Silicon Valley thrives on top scientists, engineers, computer programmers, and entrepreneurs from all over the world, and especially from Asia.

48. 40% of R&D jobs in Silicon Valley are filled by immigrants. They say the Integrated Circuit industry is called the IC industry, because of the many Indians and Chinese working in it. But now immigration into the US has slowed down. So companies in Silicon Valley are scrambling to build R&D centres abroad. As one CEO said: "If you can't bring the brain power to you, you're going to have to go to them".

49. We can build the best home for Singaporeans only by tapping the best talent from around the world. To have world-class universities for our children, we must attract the best students and professors here. To have good jobs for our workers, we must attract the best employers - which means the most talented professionals and entrepreneurs, and the strongest companies in the world, like Shell, Compaq, or Sony. Attracting global talent is essential for creating the best for Singaporeans.

50. Foreign born Singaporeans have made a tremendous contribution to our country:

a) In the first Cabinet, all Ministers except Mr Lee Kuan Yew and one other minister were born overseas: Goh Keng Swee (Malacca), Rajaratnam (Ceylon),

Toh Chin Chye (Taiping). Hon Sui Sen who joined later was from Penang.

b) Even today, out of the 32 Chairmen of Statutory Boards, 12 were born outside Singapore.

c) And in the Singapore Symphony Orchestra, 51 out of 87 musicians were foreign born.

Without this inflow, Singapore could never have made it, let alone become what it is today.

51. Gathering talent is not like collecting different species of trees from all over the world to green up Singapore. It is more difficult but absolutely crucial to sustaining Singapore over the long term. Singapore depends on a strong core of talent, in business, govern-ment and politics. We need this core, to be an exceptional country and to operate the way we do - rational, forward looking, adaptable. Without this, we cannot run a clean and efficient government, build a professional and credible SAF, run a disciplined police force, train engineers to do R&D, or produce bankers, businessmen, entrepreneurs, managers.

52. Because we are exceptional, we have become a key hub in the region, for goods and services, and for capital. This gives us influence beyond our physical size, and translates into a high standard of living.

53. To produce for world markets, and to be a successful knowledge-based economy, we need intellectual capital. In the information age, human talent, not physical resources or financial capital, is the key factor for economic competitiveness and success. We must therefore welcome the infusion of knowledge which foreign talent will bring. Singapore must become a cosmopolitan, global city, an open society where people from many lands can feel at home.

54. We need strong links with every major economy, not just with our close neighbours. Therefore we must incorporate into our society talent from all over the world, not just Chinese, Malays or Indians, but talented people whatever their race or country of origin - East Asians, South East Asians, South Asians, Arabs from the Gulf and Middle East, North Americans, Europeans, Australasians, even Latin Americans and Southern Africans. They can be businessmen, bankers, lawyers, entrepreneurs, engineers, architects, musicians, academics, technicians, or skilled workers. They will bring with them the migrant's spirit and vigour to strive and build a better life. Our economy and society will benefit from their vibrancy and drive. Some will integrate into our society and settle here. For them we hope this spirit will eventually evolve into one of loyalty and rootedness to Singapore. But even those who do not stay permanently will make a contribution while they are here.

55. Talent makes all the difference. Even for our National Day parties at the Padang and the National Stadium, we could not do without foreign talent, like Tommy Page and Sally Yeh. And in football, for the S-league, every club has 5 foreign players. Without them, the quality of the teams would be much lower, and few fans would watch the games. In 1994, the Singapore team had local born Fandi Ahmad as striker. But without Abbas Saad and the other foreign players, we might not have won the Malaysia Cup. In the World Cup, no foreign players are allowed. So apart from countries like Brazil, Argentina, Uruguay, Germany or Italy which have naturally strong players, the others don't really have a chance. Singapore will never have a chance, unless Romario (Brazil), Klinsman (Germany) and a few others like them become Singapore citizens.

56. But we can win the World Cup of competing economies, provided we are not parochial. We must change our mindset to recognise changing trends. For example, more Singapore girls are marrying foreigners and settling down overseas. Many of the wives I met during my overseas trips miss Singapore. They were most active in our Singapore Clubs. Most of them, very wisely, held on to their Singapore passports.

57. Under our immigration rules, it is harder for women to bring in foreign husbands. We will make it easier. If the foreign husband of a Singapore girl can contribute to Singapore, or if the wife is successful enough to support her foreign husband, we will welcome the husband and incorporate him into our society. It makes no sense for us to turn these foreign husbands away and lose our Singapore daughters.

58. In fact, we have the same problem for foreigners wanting to work here. There was this case of a woman who came to Singapore to work as a senior executive, but her husband's application for a dependant's pass was rejected. Reason - under our rules, only a wife can be a dependant, not a husband. But there is a practical problem. MAS tells me that there are many cases of bankers wanting to bring in "girl friends" or "boy friends"! We cannot change our own social norms, but we must solve this problem.

59. In recent years, the flow of talent into Singapore has grown - 25,000 PRs granted a year, and 30,000 last year. The new arrivals have contributed to our strong economic growth. They have settled in and integrated into our society. Some have become citizens. Singaporeans have accepted them. We need to continue and expand this inflow.

60. Foreigners can contribute to our economy at three levels.

61. Firstly, at the top. Outstanding individuals can make exceptional contributions, e.g. CEOs, scientists, academics, artists. They include Singaporeans who have settled overseas, and are willing to come back. NSTB has been systematically talent scouting for such people, and persuading them to come to Singapore, with some success.

62. Secondly, among professionals. We are close to the limit of what we can generate ourselves in NUS and NTU already. Yet we are still desperately short of all sorts of professionals - engineers, accountants, IT professionals, teachers, administrators. We need to build up a critical mass, and become a regional business centre. This is how Hong Kong and London built up their financial sectors, by attracting talent from abroad.

63. Hong Kong has a more vibrant business scene than Singapore, what SM called a "buzz". Businessmen say that there is more excitement, more deals. One reason is that Hong Kong has a larger foreign community among its professionals and business people. Hong Kong has 152,000 foreign administrative, professional and technical workers, 3 times as many as Singapore, which has only 53,500. We have many foreign workers, but mostly at the lower levels.

64. We must make it easier for qualified professionals to come to work in Singapore. It should not be harder for a foreigner to get an employment pass to be a production engineer, than to get a work permit to be a factory worker. We should also review some of the rules governing the practice of the professions, so that in areas where we are short, we can top up our own talent with talent from abroad.

65. We must integrate foreign talent into Singaporean organisations, the way successful MNCs have done. For example in the Bank of America, one third of the top 50 management positions are occupied by non-Americans. While our companies are Singaporean, the teams which drive them should comprise the best talent, Singaporean or foreign, that we can gather. Even for our statutory boards, we should tap foreign expertise in non-sensitive areas, e.g. PSA or TAS.

66. This is not just to find the cleverest individuals. It is to assemble a diverse team of people with different backgrounds and different approaches to problems. Such a cosmopolitan group will understand the region, and the world, far better than a purely Singaporean outfit.

67. We also want the third level of talent, the white and blue collar skilled workers. So many of our students (60%) now go on to university or polytechnic that we do not have enough 'O' level school leavers to do middle level jobs, e.g. bus drivers, counter staff, technicians, crane operators, dim sum chefs. These jobs may not be glamorous, but they are important. We should welcome people who may not have very high formal qualifications, but are of good character, will do a solid job, and have the potential to do well, given the opportunity.

68. We will also open up our educational institutions, to make NUS and NTU outstanding universities. The best universities in the world - Harvard, MIT, Cambridge, are outstanding because they attract the best students, researchers, and professors from around the world, and not just from the countries where they happen to be located. We must do the same for NUS and NTU, to make them world-class.

69. The foreign students will bring a diversity of backgrounds, experiences, and cultures. They will enrich the educational experience of our own students in our universities. No Singaporean student will be deprived of a university place by foreign students, because we have no shortage of places. In fact we are short of students who can meet the entry grade of NUS and NTU.

70. We will offer scholarships to top foreign students coming to study here. Not all will stay on to work in Singapore. Those who return to their home countries will be alumni of Singapore. If we look after them well while they are here, they will continue to be friends of Singapore, and form part of our network of regional connections. Others will work for Singapore companies venturing into the region, helping us to understand and operate in their home countries. They will help our regionalisation programme.

71. NUS and NTU aim for 20% their intakes to be foreign students. But in recent years they have achieved only 10%. The universities will try harder to get more. This is why we recently changed university fees for foreigners.

72. Our schools should take a similar approach. Our best schools will take more qualified foreign students. Bright foreign students will also get places in the Gifted Education Programme. We will create more places to accommodate both the Singaporeans and the foreign students. We will not displace any Singaporeans from the schools or the GEP.

73. Singaporeans sometimes grumble that they have to compete with foreigners. Recently National Junior College and Lianhe Zaobao organised a xiang sheng (cross-talk) competition. Afterwards someone wrote to Zaobao (11 Aug) to complain that although the standard was very high, he felt most unhappy and refused to cheer, because most of the star performers were students from China. He sarcastically proposed that the "national secondary students' xiang sheng competition" should be called the "national PRC students' xiang sheng competition". He felt that for our students to compete against the PRC students in xiang sheng was to demoralise them in a hopeless contest. He proposed that we should bar PRC students from future xiang sheng competitions.

74. To my surprise, the organisers replied a week later (19 Aug) that "We will make appropriate adjustments to our future competitions"! This is completely the wrong approach. Fortunately, another Zaobao reader wrote in (21 Aug) to disagree with this approach. He pointed out that actually more than half of the prize winners were local students, and that competing against PRC students was the way to raise our own xiang sheng standards. If we bar PRC students from our xiang sheng competitions, our standards will stagnate and fall.

75. This robust approach is right. We can have different sections in xiang sheng competi-tions for students who are not so fluent in Chinese, just like in football, where teams of different strengths are often divided into the first division, second division, and even the third division, with separate prizes for each division. But our best must seize every chance to pit themselves against the strongest competition available. Even if we don't win, we will improve. If we deliberately keep out the best performers from our teams, and then play only among our own weak teams so as to win prizes, we will never make it in international competitions.

76. The foreigners here do not take away opportunities from Singaporeans. On the contrary, the infusion of fresh ideas, skills and drive will create more opportunities for Singaporeans. Without foreign bankers, we cannot be a financial centre, and there would be fewer jobs for Singaporeans in the banking sector. Without foreign skilled workers, many MNCs would not set up factories here, and there would be fewer jobs not only for Singaporean workers, but also for Singaporean engineers and managers.

77. Often Singaporeans will agree with this, but then express concern not for themselves, but for their children. They want their children to inherit what they have worked so hard to build up. They fear that the foreigners will compete against their own children.

78. But it is precisely for our children's sake that we must take this open, cosmopolitan approach. This is the only way our children can inherit a vibrant, dynamic Singapore. However talented we may be, it is impossible for us to produce in our next generation the same constellation of talent, the same richness and diversity of backgrounds and abilities, just from the children of 3 million Singaporeans. The Singapore dream will disappear.

79. Another complaint is that Singaporean men have to do NS while non-citizens do not. Unfortunately, we cannot make everyone who works in Singapore do NS. What we can say is that if the son of a PR is educated here, then when he reaches 18 he must either do NS or give up his PR status. In our experience, most of the sons choose to do NS and take up citizenship. So in the next generation, they become Singaporeans.

80. Talent is mobile. If we make it onerous for foreigners to study or work in Singapore, they will simply go elsewhere. But will that make us better off? With globalisation, they will still be competing against us, only now from Hong Kong, London, or California. In Singapore they may compete with individual Singaporeans, but they also contribute to our economy, and help us to compete against other countries. So it is better for us to have them, even if it is only their sons who do NS.

81. One key issue for foreigners working in Singapore is housing. For those who cannot afford to rent or buy private properties, this is a significant problem. Many rent single rooms in HDB flats, because HDB does not allow subletting of whole flats except in special circumstances. While our wages are internationally competitive, private rentals are high and eat into their take home pay. Renting HDB rooms is also expensive and often unsatisfactory, especially for those with families. SIA has told us that their Indian and Indonesian girls want to cook, but cannot do so unless they rent the whole flat. Foreign graduate students also have problems with housing, particularly those with families.

82. The Government has therefore worked out a scheme for JTC to buy and own a stock of HDB flats, to be let out entirely to foreigners, both skilled workers and professionals, on full commercial terms. This will solve the housing problem they now face.

83. In the private property market, foreigners cannot own landed property, or low rise condominiums. But we have not imposed additional restrictions on foreigners buying or owning high rise condominiums. In May last year, when the property market was overheating, my colleagues and I debated whether to impose levies on foreign buyers of private properties. We decided against protecting the condominium market for Singaporeans. We welcome foreigners to buy property here, to make Singapore their safe haven, to live here, and perhaps eventually to settle here. To have discriminated against foreigners in the May 1996 measures would have sent a strong signal that they were not really welcome in Singapore, or that we wanted to opt out from being part of the global economy. The decision was quietly taken, but it was crucial.

84. Of course, we will make sure that overall, citizens are always treated more favourably than non-citizens in Singapore. I have no doubt that we have achieved that, through our Asset Enhancement Schemes, and especially our HDB housing programme. No Singaporean will give up his citizenship in the belief that it is better to be a non-citizen living in Singapore.

Maintaining Asian Heritage

85. With our active gathering of talent, Singapore will become more cosmopolitan. For cosmopolitan Singapore to work, however, it must be anchored by the values of our three main communities - Malay, Indian and Chinese. Otherwise it will drift.

86. The Chinese community faces particular challenges in maintaining its roots. In 20 years' time, there will be no new generation of Chinese-educated elite, because all schools now teach in English. While English must be our common working language and every Singaporean needs to know English, it will be a tragedy for Singapore if Chinese language, culture, values and traditions are no longer a major component of our cosmopolitan society.

87. We must also maintain this Chinese heritage because it is an important strand in the strength and stability of our multi-racial society. The sense of rootedness and identity, the social instinct to work together and help the less successful, the self-confidence of belonging to an ancient civilisation, have helped Singapore to hold together socially and politically. They have helped us to maintain our distinct identity and values in the age of mass travel, satellite TV and the Internet.

88. Furthermore, the Chinese language will grow in importance as China becomes stronger and more influential. In 20 years' time, China will be the second most powerful nation in the world after the US, and probably the world's largest economy. Many non-Chinese will see the advantage of learning Chinese to do business in China.

89. We must therefore find ways to sustain a high level of proficiency in Chinese in the Singapore of the future. This goes beyond speaking Mandarin fluently, or using Chinese for signs on public buildings or displays at exhibitions. We have to reproduce a core group of Singaporeans who are steeped in and knowledgeable about the Chinese cultural heritage, history, literature, and the arts.

90. The Special Assistance Plan (SAP) schools have helped. More students now take Higher Chinese for "O" levels. But we must do more. We already offer scholarships to Chinese universities, including five teaching scholarships in Chinese Language and Literature and some non-teaching scholarships. We will offer more scholarships. We need Chinese scholars for the Government and business, the media and the arts.

91. The Speak Mandarin Campaign has also been successful in getting dialect-speaking Chinese to switch to Mandarin. We should now shift its focus to promoting Mandarin as the social language of the Chinese. The educated Chinese elite should use more Mandarin socially. We can start by getting the bilingual Chinese, especially graduates from the SAP schools, to speak more Mandarin socially.

92. But while we encourage greater use of Chinese, we must also pay attention to the difficulties which some Chinese children from English speaking homes have coping with mother tongue in school. These children have at least average ability. They have no difficulties with their other school subjects. But they find Chinese in school very difficult. This is despite intensive effort, extra tuition, and close supervision from parents. Most of them are boys, maybe because girls are better at languages. Some Ministers and MPs too, complain that their sons are having difficulties coping with Chinese.

93. We have to set realistic standards for mother tongue for such pupils. The requirements should reflect what pupils of average ability can achieve with a reasonable effort. We want every Chinese child, especially those from non-Chinese speaking backgrounds, to learn his mother tongue. Our principal objective is to inculcate values and roots. If we turn children off Chinese by demanding too much of them, our effort will be counterproductive. The Ministry of Education will study this problem to see what needs to be done.

94. The Malays and Indians have similar, though less acute, problems of reproducing their Malay and Indian scholar elite. We will also attend to their problems.

Cosmopolitan City

95. One element of being a cosmopolitan city is the physical environment. Fine buildings and good urban planning alone cannot make a city vibrant and exciting, but they can help. Last year, we released plans to create a new downtown area at Marina South right next to the existing Central Business District. We will have new buildings which integrate several uses - office, entertainment, recreation, residential. Commercial developments will be interlaced with promenades and pedestrian malls which will draw people into the area after office hours. We will provide a comprehensive pedestrian network with travellator linkages and covered walkways so that Singaporeans can move about in all-weather comfort. The walkways will be fully integrated with the MRT and LRT and the bus stops and taxi-stands.

96. When we look at other major cities, we find that each has a series of distinct areas for different activities.

97. Each has a prime financial district - Wall Street in New York, Fenchurch Street in London. In Singapore we have Raffles Place.

98. Each city has a high-quality shopping mall - Fifth Avenue in New York, Oxford Street in London. We have Orchard Road.

99. Each city also has a major cultural centre for the arts - the Lincoln Centre in New York, The South Bank Centre in London. By the turn of the century we will have The Esplanade: Theatres on the Bay.

100. But we lack a distinct entertainment area, like Times Square in New York, Piccadilly Circus in London or Shibuya in Tokyo.

101. That is why we are creating an entertainment area in the Bugis District. It will have a critical mass of entertainment activities - cinemas, theatres, performance venues, music and dance, thematic shopping and dining, neon signs, vibrant street life. I am not sure what activities will take off, but Bugis will certainly offer more than the Boom Boom Room and Kumar.

Building the Best Home Together

102. More important than building a new downtown and entertainment district will be building the "heart-ware" of Singapore.

103. For Singaporeans to be proud of Singapore, they must feel a sense of ownership. All should participate actively in making Singapore a better place, through community work, in charities, and by contributing ideas.

104. Singaporeans have worked hard, and we have had good leaders who have taken the initiatives to bring the country forward. But for the future, we cannot depend on just a few people to mastermind the course for Singapore.

105. We will always need capable leaders who can think outside the box and see beyond the present. But this is a different world, driven by globalisation and technology. Things change so swiftly, and the task of governing Singapore has become so complex that no small team of ministers or civil servants can know it all, or react quickly enough to stay ahead of the game.

106. We need to tap a wide range of expertise beyond what we have in the Government. We therefore welcome constructive views from Singaporeans, whether or not these agree with the Government's own views. We need feedback, not just knee-jerk reactions and coffeeshop talk, but properly considered, informed views which can help us to improve our policies.

107. This is why we recently increased the maximum number of Nominated MPs from 6 to 9. Outside Parliament, we take the views of the public seriously. Without these inputs, we may not know if something has gone wrong with our policies, or we are missing out on some valuable opportunity.

108. Within the Government, we are encouraging civil servants to push for improvements and initiate change. It is not always easy, because our problems are complex, and changing course takes time. It can be frustrating for those pushing for change.

109. We need to open up our management culture, to get officials to be more receptive to new ideas, to see things from different perspectives, to take a national rather than parochial view of issues. This is what the PS 21 programme seeks to do. We cannot afford a mindset that instinctively shuts off challenges to the existing status quo. We must always be willing to look at issues afresh. From time to time, when a particular strategy or policy has served its usefulness, we must dare to break the mould and start anew. We can and must do much better.

110. We recently launched Singapore One, the multi-media project to wire up Singapore. It took much hard work by NCB and the other agencies. Afterwards, the officers involved discussed their experience getting the project launched. One EDB officer commented:

"The big guns had to push the regulators to change for Singapore One. If NCB had to convince the regulators, it would have taken ages, partly because of different perspectives, partly because our structure does not motivate bottom-up innovation. Big things only work in Singapore when we have the big guns behind. Because of this systemic structure, many multi-agency projects don't move on the ground until instructions come from above. Somehow, agencies have come to expect that.

"This is not what a Learning Nation is. This is not how we are going to win the competition. Our agencies have to learn work together the hard way - i.e. by taking time to listen to and understand issues from other agencies' perspective, to build up shared vision, to have quality constructive conversations and discussions about the multi-faceted issues that add to collective understanding, by having a systems thinking perspective. We can't keep looking to the top for instructions. Life is getting so complicated, the top can't possibly be involved in all things."

111. The officer makes an important point. The fault is not with the regulators or any government department. All government departments and most government officers work very hard. But our approach is too much top-down. This makes it harder for ministries and departments to work together to tackle problems and opportunities which involve more than one agency, and for officers down the line to respond intelligently to unforeseen opportunities or situations. We must change this.

112. The civil service must also be receptive to ideas from outside, from members of the public and the private sector. We will not be able to accept every view we receive. We cannot approve every Meet the People Session appeal, or scrap the COE scheme tomorrow. We need to sieve through the feedback. Where the Government cannot accept the proposals, we will explain why with good grace. We must not discourage the flow of more ideas.

113. This applies not just to the civil service, but to Ministers and the country as a whole. Even on fundamentals, we must re-examine our assumptions from time to time, not every year, but certainly every few years. If we have done our job well, and a revolution has not taken place, 90% of the time we will reconfirm that the principles remain sound. But 10% of the time we will find that a new situation has arisen, or that our old logic was flawed, and we must change, perhaps drastically. After all, what worked best in the past may not work well in a different, changed world. The SAF will tell you that you cannot fight the next war with the last war's strategy.

114. This 10% that we change and update will be crucial. If we don't keep ourselves up to date this way, we will find ourselves locked into outdated and irrelevant practices and dogmas. Eventually the system will become arthritic, seize up and collapse. This is what happened to the former Soviet Union after 70 years of Communism. It must never happen to us.

115. I shall set up a Singapore 21 Committee to identify new ideas to make Singapore the place of choice to live a fulfilling life, to make a good living and raise a happy family. It will be led by younger Ministers and MPs who will form the third generation leadership.

MALAYSIA-SINGAPORE RELATIONS

116. While we develop long term strategies to stay competitive in a globalised economy, we also need to deal with more immediate issues that arise from time to time. One such issue has been the difficulties earlier this year in our relations with Malaysia. This happened after Senior Minister's statement about crime in Johor was publicised in Malaysia.

117. Singapore and Malaysia share a close symbiotic relationship. Singapore is the biggest investor in Malaysia. Malaysia supplies us with water. Many Singaporeans and Malaysians have relatives on both sides of the Causeway. Thousands cross the Causeway daily, to work, to shop, to visit friends or for holidays. Next year, the Second Crossing between Singapore and Malaysia will open.

118. As Prime Minister, I have tried to launch a new era of cooperation with Malaysia. I carry no historical or emotional baggage. Neither do my younger colleagues. We are happy to cooperate with Malaysia, for we believe that both countries will gain from cooperation.

119. Unfortunately, despite the best efforts of both sides, from time to time our relations run into difficulties. Each time difficulties arise, negative memories are reinforced on both sides.

120. Ties with Malaysia are gradually returning to normal. But "normal" may not be good enough for this important relationship. It is better for close and intertwined neighbours to develop an abiding mutually beneficial interdependent relationship. We must strengthen trust and confidence in each other. We can help each other become successful, developed countries. We must try, whatever the difficulties, because we shall be neighbours from now till eternity.

121. This was why last year I proposed a Framework of Wider Co-operation. Such a framework is not just about the electric train and water. It is to put bilateral relations on a new footing, free from the prejudices of the past. The recent problems have not shaken my view that this is the better approach for both countries over the long term.

122. We hope Malaysia achieves its Vision 2020. A stable and successful neighbour is good for Singapore. But of course, our relations with Malaysia involve competition as well as co-operation. This happens even with the closest of neighbours.

CONCLUSION: TEAM SPIRIT AND SOLIDARITY

123. Malaysia is not Singapore's only competitor. Nor is keeping ahead of Malaysia our sole aim. Singapore is competing against the world. Our strategies - to maintain sound macroeconomic policies, to welcome talent, to maintain our Asian heritage, to be a cosmopolitan city, and to involve everyone in building our best home - will only succeed if we become one people, one Singapore.

124. Several experiences this year confirm that we are making good progress towards this goal.

a) During the difficulties with Malaysia, Singaporeans of all races stood up for Singapore. Letters from readers published in the Straits Times, Lianhe Zaobao and Berita Harian all reflected the same Singaporean perspective. This showed how far we have come in drawing the races closer to one another, towards a single Singaporean identity.

b) Recently PUB revised water tariffs sharply. Singaporeans have supported this painful but essential measure. They understood what this was about. Even Mr Chiam See Tong and Mr Low Thia Khiang, to their credit, have treated water as a strategic national issue, and not a partisan political matter.

c) In labour-management relations, we have made essential but difficult changes. The civil service has introduced rules for dealing with unsatisfactory performers. The tripartite committee on raising the retirement age has decided to cap retrenchment benefits, reduce workers' pay beyond 60, and introduce medical benefit co-payment schemes, so that we can raise the retirement age to 62.

We have discussed these sensitive matters rationally with union leaders, and reached a consensus on what we must do to safeguard the long term interests of the workers. This is to the great credit of the union leaders and workers.

125. Each time we meet a new challenge and surmount it together, we strengthen our team spirit and solidarity. When we do well, all will share in the benefits. And when we have to make sacrifices, all must bear the burden fairly. This "one for all and all for one" spirit is critical. It is how we made the grade before and how we will make the grade once more.

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