The year 2000 is a good time to reflect on our present position, how different we are from the past, and how we can best face the future. The political and economic environment have already changed, especially after the Cold War ended in 1991 with the collapse of the Soviet Union. One phase in human history has ended. The new one promises to be exciting.

The move that triggered off a globalised market began in March 1991 when the US National Science Foundation privatised the Internet, without quite realising what a powerful instrument it would turn out to be for increasing productivity, enabling people and businesses to reach out to others across national boundaries, and to create a global intellectual community and a global marketplace. It has been given credit for one of the longest boom periods in US history, 107 months.

The change with the greatest impact on our lives is the digital revolution. Information, whether in words, music or pictures, can now be reduced to digital form and transmitted at great speed and little cost, to anywhere in the world through the Internet. Every aspect of our lives - business, social and domestic activity – is being transformed. The telephone meant sound through wire, the radio, sound through the ether, the television, sound and pictures through the ether. But when you digitalise these sounds and pictures and can send them anywhere through the Internet, the implications are stupendous. At first the Internet was used as entertainment and information for individuals. Now it is used to improve the structure of industries, their supply chains and their marketing.

When businesses can have direct links with their consumers and suppliers, they can do away with intermediaries or brokers. Brokers who have sold insurance, financial services or travel packages will be affected. In their place will be new intermediaries on the Internet – information brokers, quality guarantors, "best-buy" sites. The value of brands will increase because brands ensure reliability and create confidence in the quality. Business-to-business trade will shift away from conventional vertical integration to different structures by contracting out, joint venturing and different partnerships.

The Americans pioneered this technology and their businesses have used it to great advantage in the last decade. The Japanese, the more efficient industrial producers before the digital revolution, are now hard pressed.

The Japanese government has done some soul searching. The method by which they played "catch up" with the West after World War II and excelled as a manufacturing and export nation succeeded brilliantly. But they have now hit a brick wall - slow growth since 1991 and in the last two years, a recession, from which they have not completely recovered. Last year Prime Minister Keizo Obuchi appointed a commission to review Japan’s position and point the way forward.

I met members of the commission for a discussion. They have presented their report called "Japan’s goals in the 21st Century".

The commission concluded that unless the Japanese change they will not be able to repeat the growth they made in the last four decades: "The world no longer offers ready-made models. Japan’s own latent strengths, talent, and potential are the key to Japan’s future. In this sense, Japan’s frontier lies within Japan."

For mastery of information technology tools such as computers and the Internet, they have recommended that English be their second national language.

On immigration policy, they advised their people to encourage foreigners to want to live and work in their country. They should give preferential treatment to foreign students, allowing them automatically to acquire permanent residence status when they have completed their academic work. The Japanese have been ethnocentric and unable to accept foreigners into their midst. Faced with global competition and a declining population, the commission has recommended a total change.

Globalisation has also allowed the American system to outperform the Japanese and German industrial model. Both Japan and Germany are communitarian in philosophy, placing importance on stakeholder interest, ie, the interests of managers and workers, and their business partners. In a global marketplace competing against the US, they have to move towards the Anglo-Saxon system which aims at return on capital to increase shareholder value. They have shown this to be the more productive use of capital. To succeed in competition against America, Japan and Germany will have to invest more productively (responding to market signals and rates of return), allocate labour more efficiently (by more social mobility) and deliver services competitively (by e-commerce, doing away with the Mom-&-Pop shops).

When eminently successful countries like Japan and Germany have to re-think and restructure their models, we must also do so.

What is happening in America is truly amazing. Stories of young men who have made tens if not hundreds of millions in dot.com companies have led to a frenzy to join in the gold rush. Young men are giving up the prospects of secure jobs for stock options in these dot.com companies, or they set out to form a dot.com company themselves. The chairman of a big American bank told me recently that in his last recruitment exercise, 85% of the MBA graduates in Stanford were not interested in joining the banking and financial services sector which used to get the pick of the MBA graduates because this was where the big money was. This year only 15% turned up for interviews; the same can be said of the other top business management schools.

The banker also expressed his surprise that in the last 6 months, small investors have sold out some US$51 billion worth of bonds and fixed income securities to buy dot.com companies on Nasdaq where they believe the profits are. Nobody believed that there was a downside; they have abandoned standard rules of prudence to leave some money in less risky investments, which will retain their value should there be a sharp stock market correction.

While I encourage our young to be more entrepreneurial and to take risks, please do not simply rush into dot.com companies. Remember that in certain areas you will go into head on competition with the brightest and the best of millions of young Americans, plus Indians and Chinese already in Silicon Valley. A few can make it like Sim Wong Hoo, and he has to make tremendous efforts to stay ahead of the competition. One practical way is to study what has been successful in the US, adapt and use it in Singapore and the region - like a Japanese group did for Yahoo Japan, or Masayoshi Son of Softbank who keeps on investing in other dot.com companies following the example of the successful American company CMGI.

What does this mean for Singaporeans? International players are competing against us in our region, whether it is in airlines, shipping lines or banks. They now have the ability to break into our markets. Singapore Airlines in response is joining Star Alliance of 10 airlines with three more likely to join. Singapore Airlines has now bought 49% of Virgin Airlines. This means we must have corporate leaders able to hold their own in competition against some of the world’s top corporate leaders. If you are in an alliance with Richard Branson of Virgin Airlines, you have to be as entrepreneurial, shrewd and smart as he is, or he will take you over. When Singapore Airlines started, it had Joe Pillay, Malayan-born who after graduation made his career in Singapore. So too Dr Cheong Choong Kong, the present CEO. We must have a successor CEO who must be equal not just to Joe Pillay and Dr Cheong, but to Richard Branson.

Also NOL - having taken over the American shipping line APL - we had to look worldwide for a CEO who could integrate the two companies and bring it up to global standard. We found one from Maersk in Flemming Jacobs. To stay in the game, we need to attract top class talent like John Olds for DBS.

To succeed, Singapore must be a cosmopolitan centre, able to attract, retain and absorb talent from all over the world. We cannot keep the big companies out of the local league. Whether we like it or not, they are entering the region. The choice is simple. Either we have a first-class airline, a first-class shipping line, and a first-class bank or we will be declining. One of the things we did in the early years was to buck the Third World trend by inviting the MNCs and we succeeded. Now we must buck the Third World trend to be nationalistic. We must be international in our outlook and practices.

Even more than the Japanese, we have to welcome foreign talent and persuade them to stay, if not permanently, at least long enough to raise the standards of our own executives and get our key corporations to become globally competitive.

Our own talent must be nurtured to come up to world standards by exposure and interaction with their foreign peers. Some of our best have been attracted away by leading American corporations. This is part of the global marketplace. We hope they will return to Singapore after their stint abroad. And we shall make Singapore a home to be proud of.

For 30 years we concentrated on those industrial and service sectors which were suitable for our small economy. In that phase, the risks were taken and the entrepreneurship was provided by the MNCs. We produced the engineers, managers, professionals and skilled workers to help MNCs and our own companies to grow. The MNCs provided much of the enterprise and innovation.

For our next phase we need many of our own people to be more enterprising, innovative, and willing to strike out on their own, to create small and medium enterprises, and so create jobs and wealth.

When we started 30 years ago, we were competing in the small league and doing well. We have now moved upwards into the bigger league. And technology has enabled the big players to enter our market.

Now in a globalised economy, we are in competition against other cities in the First World. Hence we have to become a cosmopolitan city that attracts and welcomes talent in business, academia, or in the performing arts. They will add to Singapore’s vibrancy and secure our place in a global network of cities of excellence.