SINGAPORE — The Committee on the Future Economy’s report — released on Thursday (Feb 9) — marks the third time in less than two decades where Singapore had assembled some of its brightest economic and business minds to come up with the way forward.

Each time, the Republic had to face a very different set of circumstances and challenges, noted Singapore Management University President Arnoud De Meyer, who sat on the Economic Review Committee (ERC) which was set up in 2001.

He recalled that back at the start of the millennium, Singapore’s economy was rather lopsided and it was relatively easy to come up with new growth drivers, such as medical tourism, the Integrated Resorts and the global schoolhouse initiative.

Today, however, Singapore has a mature and diverse economy which “does not have that many examples that it can look toward for inspiration”, Prof De Meyer said. “Thus I expect it to be more difficult to come up with a new silver bullet,” he added.

Several observers have pointed out the lack of meticulous details in the CFE’s report, unlike its predecessors’ work. But several experts felt that this was a sign of the times: It is no longer possible to prescribe a series of actions to boost the economy over the longer term, given how quickly the world changes. To do so would be akin to picking out winners and staking the country’s future on them. However, this is increasingly tricky to do in the current global climate and at this stage of Singapore’s economic development. “Over time, the Government has become more aware of the difficulty of choosing winners... The government is shifting emphasis to being an enabler,” said Distinguished Professor Ivan Png of the National University of Singapore Business School.

Instead, what is needed is a blueprint to change the “culture” of the economy, as Prof De Meyer put it, and instill resilience as well as adaptability in individuals and companies - intangibles that will be hard to measure but important in a volatile world.

Still, former Member of Parliament (MP) Inderjit Singh, who was involved in the ERC as well as its successor the Economic Strategies Committee (ESC), noted that there were high expectations of the CFE’s recommendations. “I would say that the report did not have any earth-shattering recommendations and many of the initiatives were a continuation or repeat of what the government has been focused on in the past,” he said.

GAUGING THE SUCCESS OF ECONOMIC COMMITTEES

It was during the 1985 recession - the first that Singapore faced since independence in 1965 - that the government formed its maiden committee to chart new areas of growth. But it was another 16 years before the next one was convened.

The ERC was formed in Dec 2001, just months after the world was shocked by the terror attacks on the World Trade Center and terrorist groups were discovered in Southeast Asia, including Singapore. The region was also still reeling from the 1997 Asian Financial Crisis.

The ERC identified five key priorities: Expand external ties, stay competitive and flexible as an economy, encourage entrepreneurship in a knowledge economy, promote both manufacturing and services, and develop human capital.

Specific proposals included a two year freeze on further restoration of Central Provident Fund contribution rate, setting up a national Continuing Education Training (CET) body and a Centre for Adult Learning. A working group on tourism proposed legalising casinos but this suggestion was not taken up in the ERC’s final report - although the Government subsequently decided, after an intense debate, to build the Integrated Resorts.

The ERC’s successor, the ESC, was established in May 2009, with the world still suffering from the global financial crisis that stemmed from a subprime mortgage crisis in the United States.

The ESC laid out three priorities: Boost skills in every job, deepen corporate capabilities to seize opportunities in Asia, and make Singapore a distinctive global city and an endearing home. To achieve these, the committee put forward several strategies including growing the economy through skills and innovation, becoming a global-Asia hub, and making innovation pervasive.

Productivity was a key area which the committee wanted to address: Apart from suggesting the setting up a National Productivity Fund and a high-level national council overseeing productivity as well as continuing education training, the ESC also set a target of 2 to 3 per cent productivity growth over the next decade - up from 1 per cent in the preceding 10 years.

The ESC also proposed crafting a masterplan to develop a new waterfront city at Tanjong Pagar, and studying the feasibility of a consolidated port at Tuas.

While many of the ERC and ESC recommendations have been implemented by the Government, experts said the progress is mixed. They acknowledged that efforts to boost entrepreneurship and innovation are bearing fruit but it will take more time to see the full results. Efforts to improve workers’ employability had also resulted in displaced individuals finding work during the previous downturns.

In terms of providing greater support to small and medium enterprises (SMEs), experts were divided: Some felt that much has been done in this area, while others were less satisfied with the efforts so far - particularly with support for SMEs to raise productivity. In fact, some experts cited the productivity drive as the “biggest failure”, in Mr Singh’s words.

Mr Singh, who is the chief executive of consumer-electronics firm Solstar International, added: “It is a tough job but I think the Government is not organised correctly to support SMEs, where the biggest productivity issues are. The Government spent a lot of money but the KPIs (key 
performance indicators) were focused on input factors and not outcome.”

Agreeing, CIMB economist Song Seng Wun said: “We should be using labour in a more productive manner. Services obviously is the main challenge, as 60 per cent of the economy is made up of services provided by the smaller SMEs. But their performance is very uneven.”

UOB economist Suan Teck Kin said that looking at the overall productivity figure – an average of 0.4 per cent from 2011 to the third quarter of last year – misses the point that some sectors performed better than others. For instance, in the same period, the manufacturing sector’s productivity rose 1.9 per cent on average while the finance and insurance sector and the wholesale and retail sector saw productivity go up by 3.5 per cent and 2.2 per cent respectively - well above the ESC’s targets. The main laggards were accommodation and food (-0.9 per cent), and business services (-1.1 per cent).

Mr Singh felt that Singapore has not seen “real progress” in Singapore’s bid to restructure the economy, by incentivising companies to move up the value chain. The problem is in the implementation, he said. For example, the strategy of letting smaller SMEs exit, and freeing up workers for higher value-add companies did not work because of skills mismatch, he pointed out.

Mr Singh said: “The Government also tried to select winners ... the market should have determined this as the government has not had a great track record in picking winners. More broad-based support would have been better.”

He added: “The end result is that we have failed to create new global companies in Singapore.”

FOCUSING ON THE ECONOMIC CULTURE

On the latest efforts to review the Singapore economy, the experts noted that there was a distinct lack of concrete measures. Mr Singh said he had hoped for “fresh and significant” ideas, citing the idea of legalising casinos that was mooted by the ERC tourism working group. Adding that the CFE did not offer big new ideas, Mr Singh said: “It does make the recommendations look less tangible compared to the past committees that had better understandable plans.”

Several of the CFE’s recommendations have already been rolled out - most notably, the Industry Transformation Maps (ITMs) which were announced in the Budget last year. Citing the ITM as an example, Mr Song pointed out that due to the sluggish growth in recent years, policy changes have already been set in motion. The CFE painted the policy direction in broad strokes, instead of making specific recommendations, he said.

At the press conference on Thursday, Finance Minister Heng Swee Keat, who was the co-chairman for CFE, was asked to cite the key new ideas from the committee’s report. In response, he noted that “the question of how Singapore stays relevant to the world is a question for ever”. “I don’t think there’s anything new in that question. We just have to keep ourselves focused and know how do we stay relevant to the world. In that regard, similar questions were asked even in previous reviews,” he said.

He added: “There isn’t a detailed roadmap to say, ‘follow this and you’ll reach there’ but rather, we have to find our way, we have to experiment.” Given the rapid changes taking place globally, the key is for the country to remain very adaptable, he stressed.

Prof De Meyer praised the CFE strategies which “provide a sensible set of ideas and actions for the immediate future”. As I expected, there were no silver bullets or big new initiatives like we saw in some of the earlier review committees,” he said. “What we need is a transformation of a mature and complex economy, and thus it is an absolute priority to work on these less tangible aspects of our economy, or what I often call the ‘culture’ of our economy.”

But he disgreed that there was a lack of concrete ideas. He cited the digitisation of Singapore’s companies, the emphasis on data analytics, harnessing data as an asset, and the enhancement of Singapore’s physical landscape as examples of “very interesting and very concrete” proposals. “If we can implement these recommendations, the Singapore of 2025 will look very different from what it is today,” he said.

Several experts pointed towards a growing uncertainty in the world economy, as a factor why the CFE focused on the bigger picture.

Mr Satya R, KPMG partner and head (management consulting), felt that the recommendations were meant to form a broad strategy to guide policymaking, “while keeping it flexible to respond to new threats and opportunities in a volatile world”.

OCBC economist Selena Ling stressed that under such circumstances, gazing into crystal balls have become decidedly tougher, with disruptive technology changing economies rapidly. Identifying the right broad strategy was more important, and the Government would find itself taking on the role of an enabler, in partnership with the private sector and associations, said Ms Ling. “In internationalisation, they’re not going to say which countries to go specifically. But it’s (about) recognising the limits of domestic economy and that a lot depends on the external market because of the ageing population and the shrinking workforce,” she said.

Indeed, the change in perspective arose from evolving product cycles, consumer behavior and the global environment, compared to five years ago, said CFE member Saktiandi Supaat, an executive vice president in Maybank Group who is also an MP for Bishan-Toa Payoh GRC.

In the new economy, “as long as you are nimble enough, hungry enough to be on top of any new development, then you’ll be fine”, Mr Song said.

Prof De Meyer noted that the Republic has in fact become a role model over the years for many other countries, and the expectation is now for the country to “invent the future”.

That is where entrepreneurship and innovation come in, he said. “The world is a lot more uncertain than in 1985 or 2001, and thus we need to be flexible and agile. There are fewer role models that we can learn from.”

“We just have to have the ambition and the passion to become better at what we already do,” said Prof De Meyer.

It has not gone unnoticed that several buzz phrases kept appearing in the economic committees’ reports over the span of 21 years - such as innovation, entrepreneurship, skills, and deepening international links.

But the experts stressed that this is not because Singapore has failed to make progress in these areas. The reality is that the country needs to continually take things to the next stage, they said.

In particular, Prof Meyer felt that there has been a lot of progress in the area of entrepreneurship. “I observe many more entrepreneurs than, for example, 10 years ago. But now we need to grow these entrepreneurial initiatives into S$100 million companies. We have done a lot of successful research, now we need to turn these results into commercial successes. So the nature of these concepts of innovation and entrepreneurship has changed. We have to get into a higher gear.”

PwC Singapore partner Winston S Nesfield noted that excelling in innovation and entrepreneurship will “never be as straightforward as other hard metrics such as foreign direct investment”. Achieving these objectives require building different processes and behaviours, in order to produce sustainable outcomes, he said. “This is hard stuff and requires real change at political, cultural and individual levels of society. This is why these issues are recurring. Singapore must match its well-regarded political leadership success with deep and real change at the cultural and individual level,” he added.

And despite all the hand-wringing over the productivity drive, the experts said they were not surprised that the Achilles heel of the Singapore economy did not make it prominently into the CFE report. Productivity improvements will be a natural outcome of the committee’s strategies, if they are successfully implemented, they said. “If we work at innovation, skills, if we get these things right, then productivity will follow. It is tackling the source of these issues that can raise productivity,” Mr Suan said.