Good Evening, Ladies and Gentlemen,

The US economy has been experiencing sustained growth with low inflation. This sterling performance is founded on enterprise and productivity gains brought about by rapid advances in IT and globalisation, and has been described as the New Economy.

Technology has clearly been the key driver in this profound structural change in the US economy. Productivity growth rates in the US since 1993 have been rising strongly. This digital revolution has created discontinuities and at the same time unparalleled opportunities for the global expansion. Businesses and countries that fail to seize these opportunities will be marginalised.

More profound changes lie ahead. In the past 2 weeks I have met US technologists at the leading edge of IT development. Internet 2 for example may lead to an explosion in bandwidth by up to 1,000 times. Mobile e-commerce will change the way we live.

Will Asia be able to embrace the New Economy? Asia has been through a wrenching experience in the last 32 months. But it is looking much better now. Foreign funds have returned to the oversold markets. Growth turned positive in most Asian countries by the first quarter of 1999.

Reforms, although progressing much faster than before, are far from complete. Improving standards of corporate governance will be a long process. However, increasing global electronics demand has supported Asia’s recovery. Parts of Asia has the potential to charge again.

But the rules of the global economic game have changed. Regions such as Latin America and Eastern Europe will be competing for investments not just on cost but also proximity to markets. Asia can no longer count on increasing FDIs for growth. Asia now needs to embrace the New Economy to enjoy the kind of productivity gains the US has achieved. Failure to do so will mean an inability to compete in the global marketplace, and consequently slow growth.

There are signs that Asia is embracing the IT revolution. The current e-commerce market in Asia is small because on-line buying culture is still nascent and infrastructure such as payment systems still underdeveloped. But this will change as the number of Internet users increases.

Singapore in 1999 had one of the highest home Internet penetration rates in the world at 42%. China’s Internet users quadrupled in 1999 compared to 1998, and is expected by one estimate to grow by over 100% per annum from 9 million today to 60 million in 2003. Japan already has 20 million users and growing. Overall, the number of Internet users is expected to grow at 50% per annum in Asia over the next few years, triple the rate of the US. Asia should at this rate overtake the US by 2003.

E-commerce is expected to follow this trend. B2B commerce is already taking off. Japan is ahead in the pack, with B2B commerce at about US$12 billion in 1999 and growing quickly. The other countries are also expected to follow this trend.

B2C commerce is also showing signs of exponential growth. In 1999, the number of e-stores in China grew from 100 to over 600. The same scenario is repeated across East Asia. A number of portals offering Chinese content has also sprouted in the region, such as China.com, Sina.com and Singapore’s AsiaOne.com. The potential of websites offering Chinese content is huge.

Businesses now source for talent and opportunities globally. They invent, collaborate or acquire technologies and capabilities globally to ensure their competitive edge. As the Internet makes more markets contestable, businesses in Asia must compete on this platform or be swept aside.

The national counterpart to businesses that source globally is a society that welcomes foreign talent. Societies that will succeed are those which easily assimilate foreigners. The Silicon Valley is such a place. Not only is it "colour-blind" and uniquely meritocratic, it has a culture that draws newcomers in. Asia’s businessmen must acquire these attributes and be globally literate.

A critical factor is the ability of a people to change swiftly to new opportunities. Societies must be flexible in re-inventing and refining their economic system. The strength of the American system is that it has always embraced change and creative destruction.

Asian countries must do the same. US technology-driven productivity growth in recent years has rendered more efficient business value chains, releasing workers to other sectors of the economy to create new wealth. Asia must remove structural impediments like lifetime employment or inefficient labour markets to reap the same results.

There are enough Asian talent with the technological savvy and drive to spearhead the New Economy. In Silicon Valley, almost 30 percent of new start-ups are now headed by Asians, mainly Indians and Chinese. Asia’s commitment to education will produce knowledge workers required to support the New Economy. Engineering graduates make up 40%, or 1.2 million, of the stock of tertiary students in China, compared with 19% (472,000) in Japan and 7% (472,000) in the US. The US produces 63,000 engineers a year. Asia as a whole produces 5 times that at 343,000.

East Asian nations are attracting back talent. Asian graduates from Western universities who have been successful entrepreneurs in the West are returning home to create new high-growth enterprises. A transnational community of Taiwanese entrepreneurs, for example, has fostered 2-way flows of capital, skill and information between Silicon Valley and the Hsinchu region of Taiwan. Indian-born entrepreneurs are linking Silicon Valley with India’s booming software export industry. Silicon Valley’s growing pool of mainland Chinese immigrants suggests the potential for comparable connections with the dynamic coastal regions of China. Singapore has long adopted a policy to bring in foreign talent to enhance our human capital. All these initiatives will steadily grow the pool of Asian talent to compete in the New Economy.

The Chinese and Japanese have been successful entreprenuers. Risk-taking is a part of Asian business culture. Asians have a natural bent for technology. But Asia has yet to nurture a critical mass of "technopreneurs" that drives the digital economy by innovating cutting edge technology and new business models. But this will come.

Some Asian countries are beginning initiatives to engender greater creativity among their young.

To blossom, creativity and innovation need the right incentive structures and culture. China and India have had many inventions in the past but did not exploit these advantages because the prevailing value systems did not reward enterprise.

A key factor for new business start-up and growth in the New Economy is venture capital. Asia must develop the venture capital expertise so that capital markets can identify and match funds with good and innovative ideas. Asia also needs to develop venture capitalists who can nurture good ideas through the difficult early years. Asia lacks such experienced people and must learn from you.

Many Asian countries have recently introduced high-tech bourses where new start-ups without the usual track records can raise funds. These will compete with NASDAQ and retain Asian ideas and talent. Governments have either created new bourses (Hong Kong's GEM, Malaysia's MESDAQ) or relaxed listing requirements in existing bourses (Singapore’s SGX, Taiwan's Main Board & OTC). They are competitive. A listing on SGX and GEM would cost 3.5% of the capital raised, compared to 7% for a NASDAQ listing. Japan will soon have three competing New Economy bourses – MOTHERS, Japan's NASDAQ, and JASDAQ. Korea and Taiwan are expected to launch new exchanges soon. The creation in Asia of such high-tech bourses, and venture capital will add liquidity and flexibility to the capital markets. Capital allocation will be enhanced and depend less on the banking system.

Much of Asia currently lack the physical infrastructure to allow access to the Internet. In 1998, only 11.5% of Asia’s population had access to fixed telephone lines. This is expected to increase significantly with deregulation and increased investments. Furthermore rapid developments in wireless telecommunications will favour Asia by bringing the information revolution especially to poorer regions and allowing them to leapfrog development opportunities.

Hong Kong and Malaysia have been aggressive in creating the supporting infrastructure with the Cyberport and MSC projects respectively. The Singapore ONE broadband infrastructure will attract major global content players to use Singapore as their pilot site.

Asian governments have been boldly deregulating and liberalizing the financial and telecom industries. Hong Kong and Singapore have increased the number of operating telecom licenses. Indonesia, Thailand and Korea have liberalized the ownership of banks to foreigners. Japan has deregulated its securities industry. China, upon joining the WTO, will relax foreign investment in telecom and other service industries.

The results from liberalization and deregulation have been dramatic. Korea's online trades as a percentage of domestic stock-market transactions, in excess of 40%, is the world’s highest. Hong Kong has over 130 Internet service providers. Asian telephone and Internet charges have fallen sharply.

Strong government has been a key factor in Asia’s growth over the last 30-40 years. Many Asian governments have already taken the initiative to embrace Internet technologies. The most proactive and ambitious have been the Singapore, Malaysian and Hong Kong governments. Others are following. Asia's shift towards a New Economy has so far been more "top-down", as against the "bottom-up" phenomenon in the US. This is the necessary first stage as Asia is generally over-regulated and lagging in infrastructure. But sustained success of private sector-led productivity growth will depend on creating conditions where innovation can thrive, capital markets are liquid and flexible and governments are willing to deregulate.

Asia has a track record of being able to re-engineer itself. They are young societies willing and able to embrace the New Economy. Japan, as the largest Asian economy, will have the greatest impact. Its businesses and banking system have been badly shaken in a decade of economic stagnation. There are signs however that the Internet revolution is re-shaping Japanese businesses. A new class of successful businesses like Softbank and Hikari Tsushin, have turned into role models and sparked a new wave of optimism and entrepreneurship. In Korea the KOSDAQ has risen by 241% in 1999, outstripping NASDAQ’s growth of 86%. The same phenomenon is catching on in Hong Kong. Singapore and Taiwan are buzzing with activity. The growth in venture capital and deal flows in Singapore has been exponential the past year.

Japan, Korea, Singapore, Hong Kong and Taiwan are the 5 Asian economies most prepared to move into the New Economy. China will not be far behind. Malaysia will move after restoring investor confidence. The rest of East Asia is generally not far behind. Growth in general will continue to be strong.

East Asia has one of the world’s youngest and fastest growing populations. It has a wealth of hard working entrepreneurs, engineers and technicians. Asia has previously achieved one of the highest growth rates in the world. Asia is well placed to produce the fundamental factors needed to embrace the opportunities of the digital revolution. It should be able to reproduce high levels of productivity led growth in its next phase of economic development. Singapore intends to be at the forefront of these developments. The government recognises that the catch up policies that had worked well in the past are no longer adequate. Young people understand that in this phase of the digital revolution the opportunities to innovate are huge and they must be willing to take risks in many new start-ups, although only a few of them will succeed. For venture capitalists and investors, Singapore has exciting companies for global and Asian markets. We aim to become the optimal location for R&D and start-up capital of Asia. I invite you to partner Singapore and our region to help us build the new Asian economy together. That our working language is English will help the partnerships.

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