Mr Lim Boon Heng,

Minister in the Prime Minister’s Office

and Chairman, SPRING Singapore

Dr Cham Tao Soon, Chairman of the SQA Governing Council

Mr Lee Suan Hiang, Chief Executive of SPRING Singapore

Distinguished Guests, Ladies and Gentlemen

Last year, Singapore’s economy shrank by 2%, a steep plunge from the 10% growth the previous year. Partly as a result of our weak economic showing, our international competitiveness ranking slipped, from a consistent second behind the US, to 5th spot in the latest rankings in the 2002 World Competitiveness Yearbook by the International Institute for Management Development (IMD). We were overtaken by Finland, Luxembourg and the Netherlands.

This reflects the nature of the new economic landscape we face – volatile, unpredictable and intensely competitive. New competitors can arise from nowhere. Leaders can be overtaken overnight. Even in football, big name teams like France and Argentina exited in the first round in last month’s World Cup.

This volatile and intensively competitive environment is something members of my audience from the corporate sector would be most keenly aware of. For you constantly have to worry about whether a rival or a new technology would render your business model obsolete, or even put you out of business. If there is one key lesson for us, it is that success cannot be taken for granted. Like productivity, it is a marathon without end. That being so, how do we, in Singapore, whether as a country or as corporate entities, thrive in such an environment?

A closer look at the 2002 IMD World Competitiveness Yearbook would be helpful in at least telling us where we stand and the critical areas where we lag behind in our competitiveness ranking. Singapore was number one for the category of factors under "Government Efficiency", but was 11 out of 49 for "Business Efficiency". The challenge for us is to have our businesses and enterprises up there with the very best, to be productive and innovative. We will need to press on with our efforts to develop a more vibrant entrepreneurial culture.

In our next phase of development as an economy, which some have described as an innovation-driven phase, the dominant source of competitive advantage will come from the ability of organisations to create value by producing innovative products and services, always using the most productive methods.

Innovation is not just about generating ideas. Nor is it merely about interesting inventions. It is about bringing ideas to fruition – be it a new product, service, or organisational process – to meet market demand. The OECD estimates that over half of the total output of the developed world in the last 25 years resulted from innovation. And this proportion will increase, as economies become more knowledge-intensive.

While the occasional breakthrough was sufficient for growth in the past, growth in the new economic landscape demands that innovation be pervasive and continuous. Many other nations, with abundant labour and much lower wages and lower costs of production, are apt to follow our patterns of economic development and try to catch up.

We will therefore find it increasingly difficult to rely simply on increased efficiency and higher quality of our products to raise our productivity and competitiveness. For us, continuous innovation will be the new creator of wealth and jobs. It will be the basis for us to have sustained productivity and economic growth.

To strengthen the innovative capability of organisations, I am pleased to announce the launch of a new initiative – the Singapore Innovation Class. This programme, which will be administered by SPRING Singapore, will help organisations assess their innovative capabilities, address gaps and how best to create market distinction. Organisations that are assessed to have achieved the requisite capabilities for innovation will be accorded the "Singapore Innovation Class" status.

The target is to have at least 3,000 Singapore Innovation Class organisations employing some 60% of our workforce within the next 10 years. Its aim is to build a pool of innovative organisations that will drive our economic growth in the new age. This is a challenge for Corporate Singapore to take up.

To accelerate the process, Government funding support will be provided to assist organisations develop their innovative capabilities through training and consultancy. The whole programme will cost some $130 million, and details will be announced by SPRING Singapore.

Business excellence in the innovation-driven stage of development will increasingly be underpinned by innovation. Sustained productivity improvement and innovation do not happen by chance. They are the result of a committed and concerted effort that drives the business forward through a total approach towards excellence.

The Singapore Quality Award (SQA) provides organisations with the business excellence framework to benchmark their performance and to be a valuable tool for sustaining their competitive edge. Organisations such as Citibank’s Regional Cash Processing Centre and Philips DAP Factory, past winners of the SQA, have shown how significant results in productivity improvement and innovation were achieved by their total approach.

Research also shows the positive correlation between performance and usage of such a framework. Professors Vinod Singhal of the Georgia Institute of Technology in the United States and Kevin Hendricks of the University of Western Ontario in Canada, studied 600 publicly-traded firms that have won quality awards. Their five-year study shows that award recipients experienced a 44% higher stock return, a 48% higher growth in operating income, and a 37% higher growth in sales than the control group of similar firms. Award winners also experienced significant improvements in employment, asset growth and return on sales.

I am glad to learn that we have so many recipients for tonight’s awards, the highest ever. They have shown that despite unexpected economic storms and corporate turbulence, it is important to look at the long-term, using the SQA framework. Their presence here tonight reflects their spirit and determination to achieve organisational excellence, rain or shine.

My warmest congratulations to all winners.

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