OCSS Fireside: Finding Economic Space for Singapore Post Covid
Fireside chat with Mr Chng Kai Fong:
“Finding economic space for Singapore in a post Covid-19 World”
29 September 2021, 7pm
The Oxford and Cambridge Society of Singapore (OCSS) was privileged to have Mr Chng Kai Fong, outgoing Managing Director of Singapore’s Economic Development Board (EDB) speak to us virtually on 29 September 2021. Mr Chng will take on an appointment as Second Permanent Secretary of the Smart Nation and Digital Government Group in October 2021. In attendance were guests from the Singapore Institute of International Affairs, Cambridge University Malaysia and Singapore Association and Oxford University Malaysia and Singapore Association. The fireside was moderated by Toh Han Li, Vice President (Cambridge), OCSS.
Opening Remarks
Mr Chng opened with three macro trends that would have a major impact on Singapore.
First, on the geopolitical front, greater strategic competition between the US and China would create both threats and opportunities for Singapore. Recent developments such as the AUSUK Alliance which was essentially an arms deal illustrated how Sino-US relations was the most important bilateral relationship in the world. Singapore sits in the middle and is continues to be reliant on the US for security. On the other hand, China is the top trade partner for almost every country in ASEAN, including Singapore.
Second, climate change which had significant implications. While much has been said globally about climate change, there has been little actual movement. The problem with climate change is that we know it will have a big impact, but the year-on-year change is not obvious. From Singapore’s perspective, dealing with climate change puts additional constraints on our economy as we will not only be land- and labour-constrained, but also carbon-constrained.
Third, technology was disrupting a lot of business models. We have already seen the rise of aggregators in the e-commerce business model, where platforms such as Amazon and SEA/Shopee control the customer and can thereby dictate supply. Technology has also accelerated other disruptions, for instance Chinese e-commerce platform Shein which was not just “fast” fashion but “ultra-fast” fashion with a supply chain turnaround up to four times faster than its competitors.
Mr Chng then turned to how Singapore could better position itself for the future. He noted that a key advantage for Singapore is that it is in the middle of a growing Asia, especially Southeast Asia with its population of over 660 million and a growing middle class. Singapore could thus benefit from the region’s demographic dividend. One only had to visit to see how much more energy there is in Asian cities such as Ho Chi Minh City and Jakarta – with busy flights, high human and vehicular traffic, bustling nightlife, as well as growing numbers of hipster cafes reflecting the growing sophistication of the consumer – compared to their European counterparts.
Mr Chng said that Singapore would need to take a “same, same but different” approach as a country. We were reaching the limits of population-led growth and would have to grow through innovation and productivity. In terms of the challenges facing Singapore, Mr Chng said that the major challenge over five years would be transforming the economy; over 25 years it would be dealing with population issues; and over 50 years the main challenge would be one of identity. All three challenges were interrelated; a good example was the recent CECA debate over Singapore’s immigration policy that reflected not just economic but also demographic and identity concerns.
As for what Singapore needs to do to transform itself, Mr Chng outlined three possible strategies. First, Singapore should position itself as an innovation lab economy. He cited examples such as SEA/Shopee and Nanofilm, Mr Chng said that the “power of Singapore” as a small city with a tiny domestic market but strong connections with the rest of the world is in incubating companies that can interoperate and go global right from the start. Mr Chng cited Forrest Li as having pointed out that if SEA had started in China instead of Singapore, the natural focus would have been China’s large domestic market instead of going regional right from the start. Now however, this international culture was serving SEA/Shopee well in its bid to enter other markets such as Latin America.
Second, to enable innovation Singapore needs a range of different talent. Immigration would be one channel – that is one reason why the US thrives is because they have access to global talent instead of being limited to its own population. Singapore should welcome talent but also create opportunities for our people to innovate and go out in the world to thrive. Mr Chng felt that there were not many places in the world (except perhaps Silicon Valley) that gives as many opportunities to young people as Singapore, with the numerous tech and financial firms from all over the world with a significant presence in Singapore.
Third, drawing from the IPS-Nathan Lectures by Ravi Menon, Managing Director of the Monetary Authority of Singapore, Mr Chng said that Singapore needs to transition to a “high-productivity, high-wage, high-cost economy”. This would require a shift from a knowledge-intensive economy to a conceptual economy. Elaborating, Mr Chng said that the traditional knowledge-intensive sectors such as law and medicine that used to be about being a repository of knowledge in a single domain might become less relevant due to rapid advancements in technology and automation. It would instead be more important to be innovative in creating valuable concepts and designs that draw inspiration from multiple domains.
Q&A
When asked about the impact of COVID-19, Mr Chng’s own view was that COVID-19 would not be a major long-term factor determining Singapore’s future. He added that in the larger scheme of things COVID-19 had probably been a good exercise for Singapore – Singapore has done well as the only country that managed to keep fatalities low while also achieving a high level of vaccination. Singapore also managed the economic impact relatively well, albeit with a large draw on our reserves, while also maintaining its reputation as a reliable economic partner by keeping the flow of goods going and not interdicting any medical supplies even at the height of the pandemic. Moving forward, if MNCs start to play less of an efficiency game and more of a resilience game, this would play to Singapore’s strengths even if it is higher cost. In the long-term however, Mr Chng felt that the real challenge to Singapore vis-à-vis COVID-19 was internal –cracks have been seen forming in terms of hot button issues such as foreign talent and inequality, and those are the things Singapore needs to address head on to keep its place in the sun.
Mr Chng was asked if he agreed with Mr Goh Keng Swee’s description of Singapore as “a socialist economy that works”, and whether he could see Singapore following China’s lead in making bold moves to rein in tech companies, restrict youth gaming time, ban for-profit private tutoring, and de-leverage the real estate sector. Mr Chng replied that it was very interesting to see what was going on in China, and he felt that Western media was not quite accurate in couching it as an exercise in asserting control by Mr Xi Jinping. The truth was more nuanced, and China had legitimate concerns over major issues such as overreliance on tech firms, a winner-takes-all approach to education, excessive time spent on gaming, and a real estate bubble. Mr Chng added that he had just seen a chart about poverty in China over the last 50-60 years. In the initial years, poverty eradication was largely due to mobilizing economic growth, but in the last 20 years or so social transfers in China contributed to a much larger proportion of poverty eradication, reflecting the growing role of the state in intervening in social issues. As for Singapore, Mr Chng felt that given trends such as growing inequality, it would likely have to intervene more on such issues to preserve its social compact.
When asked about his time at EDB, Mr Chng explained that it is EDB’s job to get to know as many desirable companies as possible and to pursue these opportunities. He cited former EDB Chairman Philip Yeo, who memorably said he was “neither civil nor servant”, played a key role in forging EDB’s culture, and Mr Chng was happy to report that that buccaneering can-do spirit was still part of EDB culture. Mr Chng replied that he was happy that he had played a part in making EDB a leaner and younger organization, which would enable these younger EDB leaders to take it forward to new frontiers.
Mr Chng was asked about a possible trade-off between sustainability and tech investment, for instance in the recent moratorium declared by Singapore on new data centres. Mr Chng replied that the linkage between physical data centres and other tech investment had yet to be established. He added that the moratorium was important to provide enough carbon headroom for industries such as energy & chemicals semiconductors and biopharma to transform. In the longer-term, Singapore would always face such a trade-off because it is very constrained in terms of alternative energy.
When asked whether Singapore would consider nuclear power, Mr Chng said that it was a possibility as the technology might be viable in terms of safety and reliability, but it would also depend on the ability to win a public consensus to move ahead with nuclear power.
When asked about Singaporeans appetite for taking risks and pursuing entrepreneurship, Mr Chng said that he hoped that younger Singaporeans would try to see the opportunities out there – Singapore was too small to be a market, so they would have to have an interest in the world, especially developing markets.
For the final question, Melanie Chew, President, OCSS asked Mr Chng to say more about the three timeframes and challenges for Singapore in terms of economic transformation, population and identity. Mr Chng reiterated that these issues were closely interrelated, which was why it was important for Singapore to address these head-on now.