Speech by President Tony Tan at St Gallen Symposium Circle of Benefactors Dinner

Mr Peter Voser
Chairman, Board of Trustees of St. Gallen Foundation

Dear Students

Distinguished Guests

Ladies and Gentlemen

        It is a great pleasure and honour for me to be here this evening to address the St. Gallen Symposium Circle of Benefactors at the 44th St. Gallen Symposium. I would like to thank the St. Gallen Foundation and its Board of Trustees, especially my dear friend, Mr Walter Kielholz, for making it possible for me to speak at this evening’s event. I am happy to see many old friends here including Dr. Wolfgang Schürer, Chairman of the Board of the Lindau Nobel Laureate Meetings, who is also an active alumnus and Former Visiting Professor of the University of St. Gallen. 

        St.Gallen has a long record of academic activities and connections in Singapore. Singapore is the Asian hub of the University of St. Gallen, which carries out its academic activities related to Asia through the St. Gallen Institute located in Singapore. A warm welcome to St. Gallen’s presence in Singapore.

        I would also like to congratulate the organising committee for this year’s thought-provoking theme.   The “Clash of Generations” provides an interesting lens to make sense of the many profound changes that are affecting societies, governments and economies across the world. I have a very challenging task of addressing such a complex topic as the first speaker in this year’s symposium. But I am glad to also have the privilege of being able to decide which aspects of this multi-faceted issue to touch on.

        I will start by sharing some observations on the impact of globalisation and Singapore’s policies to build a competitive and inclusive economy.

IMPACT OF GLOBALISATION AND TECHNOLOGICAL CHANGE

        Globalisation and technological advancements are among the major drivers of global growth over the last few decades. Global trade has reduced prices, provided more choices, and increased consumption. Technological innovations have enabled markets to produce a vast range of goods and services at much higher quality than was possible before. 

        On the other hand, globalisation and technology have driven wages down in many countries. Foreign direct investments have moved jobs to wherever labour is cheapest. Developments in technology, especially in ICT, have subjected even professional services such as legal and accounting services to international arbitrage. Wages today are determined by the lowest common global dominator for both the blue and white collar worker.

        A recent Oxford University study estimated that about half of the jobs that we know of can be performed by robots or computers. I don’t think that all these jobs would disappear very soon but it does mean that we cannot take for granted that the jobs we are familiar with will always be there. The study also suggests that workers with skills such as creativity, management or sense-making capabilities that complemented computers would be most resilient to changes in technology. 

MAJOR INFLEXION POINT TO PREPARE ALL GENERATIONS FOR THE FUTURE

        There is no turning back globalisation and technological advancements. Any country that tries to do so will eventually be worse off. 

        Businesses will continue to be the generators of wealth and creator of jobs and governments must continue to have clear and stable policies to reduce uncertainty and encourage business investments. Governments must also continue to create the environment for technology advancements to take place for the benefit of their peoples.  

        The biggest challenge facing many governments around the world is job creation. The best way to do so is to ensure that workforces have skills that match business needs. This approach yields the highest chance of reducing unemployment and raising living standards so that economic growth is inclusive and sustainable. 

        But this is increasingly difficult because globalisation and technological advancements have substantially shortened the life span of skills and increased the rates of skills obsolescence. We are at a major inflexion point that requires substantial resources to not only prepare our younger generations for the future but also to upgrade existing workforces. 

        Significant investments are needed to ensure that our young are equipped with the right skills, whether it is the ability to innovate or work with technology so that they can benefit from the opportunities offered by globalisation and advances in technology. Any delay in doing so would be unfair to our future generations and would dampen the confidence that our youths have for the future. But resources are also needed to help current generations of workforces retool and work with new technology. This will be difficult for some, especially the older workers. While safety needs would have to be in place for workers who may be structurally dislocated, incentives must be structured to encourage workers to keep learning and relearning in the new economy.

        Every country is on a different starting point in this transition because of differences in fiscal resources, demographics and culture. Countries with younger and better educated workforces and which have strong balance sheets are in a better position to make the transition. But for many countries whose demographics are older and which have substantial national debts, adjustments to scale back universal benefits through means-testing and postponing retirement ages to reduce pension liabilities are required to free up resources for investments in the young. Such changes involving significant reallocation of benefits across generations and different interest groups would be difficult and must be accompanied by changes in social compacts.

SINGAPORE’S POLICIES FOR A COMPETITIVE AND INCLUSIVE ECONOMY

        Singapore is a small country with no natural resources, and a domestic market too small to support local activity, Singapore made a strategic decision, after gaining independence in 1965, to liberalise our economy and welcome foreign direct investments which produced not for the Singapore market which is small but for the regional and global markets. Singapore has no choice but to stay globally competitive so that our economy will continue to grow.  This has allowed Singapore to create jobs for our people and raise living standards over the last five decades.

        Being a small open economy, Singapore is keenly aware that the only way for our people to benefit from globalisation is to have the skills relevant for the global economy. Education has been a cornerstone of Singapore’s policies to ensure that our people have the right skills that are needed for each stage of Singapore’s economic development. Since the 1990s, significant investments have been made into our education sector at all levels to prepare our people for a knowledge-based economy where ideas would be the key sources of our competitive edge.    

        To help existing workers improve themselves, and upgrade their skills for higher incomes, heavily subsidised programmes are in place to retrain dislocated workers for new jobs, and upgrade the skills of existing workers. This is complemented by an income supplement scheme or “workfare” to help low-wage workers increase their take-home pay while encouraging work. Workfare allows Singapore to share the fruits of economic growth by redistributing income to lower-income Singaporeans while preserving the work ethic. 

        The retirement needs of the older population in Singapore are funded by the Central Provident Fund (CPF). Through the CPF, workers save a defined portion of their wages in individualised accounts and draw down on these accounts for housing and retirement needs. For low wage workers, the Government tops up their accounts whenever our budget allows for it. The future retirement and medical needs of all working individuals are thus funded from their personal CPF accounts and not taxing from future working generations. 

        Economic growth and fiscal prudence over the years have enabled Singapore to build up strong fiscal reserves, which contribute to a stable Singapore dollar to support trade, and help foster investor confidence. The investment income from the reserves also serves as an added source of funding, which enhances Singapore’s ability to meet its longer term social and developmental needs while retaining its competitiveness.

        Singapore has evolved its policies over the last 50 years based on a strong social compact that allowed tradeoffs to be made between different stakeholder groups for the country to make progress, and this would continue to be critical to Singapore’s ability to ensure that growth continues to be inclusive and beneficial to our current and future generations at all levels.  

CONCLUSION

        Ladies and Gentlemen, long term policies and their consistent application are needed to ensure that globalisation and technology continue to work for all generations. For many countries, this would mean difficult adjustments affecting different stakeholders and interest groups. I have no doubt that the St. Gallen Symposium, where global leaders of today meet with leaders of tomorrow would be a most useful platform for active conversations between different stakeholders on the various approaches and their trade-offs for such transitions to take place. I would like to once again congratulate the organisers of the 44^th St. Gallen Symposium for the foresight in identifying “The Clash of Generations” as the theme for discussions over the next few days.

        Once again, thank you for inviting me to the Symposium. I wish you all a pleasant evening.