Economic realities: 3 harsh takeaways from the Committee on the Future Economy
by Ryan Ong
THE Committee on the Future Economy (CFE) isn’t just about guessing the future. It has laid the groundwork for how our economy will be changed. And as you can expect, the language is couched in non-alarming terms. But take a close look at the implications and you’ll see some of the harsh realities we’re about to face:
What is the CFE?
The CFE is a 30-member committee that aimed to position our economy for the future. It completed work last year and came up with seven strategies to take us forward.
By the CFE’s own admission, the seven strategies are not a “roadmap”. They have only determined a general direction with the expectation that we’ll have to wing it along the way; kind of like IKEA’s instruction manuals. The seven strategies are:
- Deepen and diversify international connections
- Acquire and utilise deep skills
- Strengthen enterprise capabilities to innovate and scale up
- Build strong digital capabilities
- Develop a vibrant and connected city of opportunity
- Develop and implement Industry Transformation Maps
- Partner each other to enable innovation and growth
Yeah, that’s about as revolutionary a development as the chopstick holder. Most of you have already heard of these things and from a dozen other sources. But no one can really argue that the strategies aren‘t right, even if it means there are some harsh takeaways. And there are if you look closely. For example:
1. We are going to greatly increase competition for ourselves
I’m talking about that first point – “Deepen and diversify international connections”. This is about having bilateral initiatives, so our businesses can expand abroad and vice versa. Generally a good idea, but note the term “bilateral”. It’s not one-sided.
When our businesses can expand abroad, with low trade barriers, then other countries’ businesses can expand into Singapore as well. Let’s use an example from the linked Straits Times (ST) article:
“It (the CFE) cited the example of Block 71 in San Francisco, which supports local startups that want to enter the US technology market and also provides a gateway for US companies to enter the Singapore and South-east Asia markets.”
Because it works both ways, this invariably means Singaporeans – and Singaporean businesses – will face more competition. For example, say your business provides web development. Right now, you compete with only local firms and you’re easily one of the best.
But what if we open the doors to the most talented web developers in Europe, the US or China? The talent pool grows larger and it becomes harder for you to stand out – both as an individual and as a company.
And it doesn’t just end there. Remember that there are talented developers in poorer countries, who are willing to work for half the cost. So now, you’ll face two-pronged competition: top talents in other developed countries (who have the same level of education and resources as you, if not more) and talents in developing countries (who don’t have your resources but can drastically undercut you).
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In fact, the CFE has suggested we go abroad and take a look:
“Other recommendations include developing more internationalisation programmes for students and having trade associations and economic agencies undertake more study trips to the region for businesses.”
I’m pretty sure this isn’t just for us to go abroad and make friends. It’s probably to familiarise us with what our foreign counterparts are up to, so we know how much we’re up against. Are you ready to compete with the country that created the National Aeronautics and Space Administration (NASA)? The country that lists Cambridge and Oxford among its universities? You’d better be.
Singapore can’t stop engaging in free trade. We don’t have the luxury of voting in celebrities to build giant walls or whatever as we have limited resources. But if you’re not sweating about the implications, then you either have admirable confidence or brains of jello.
2. Your little boutique business hasn’t got much to cheer about
Oh, look – “Strengthen enterprise capabilities”. That means handouts for Small to Medium Enterprises (SMEs), right? Like the old Productivity and Innovation Credit (PIC), where you could buy Macs for your cafe and such.
But, no; pay attention. The keywords here included “scale up”. Again, here’s an example given in the ST article:
“It also called for more targeted help for enterprises with potential to expand. For example, Fong’s Engineering – a precision engineering company – has seen its year-on-year revenue jump by 15 to 20 per cent, and is expanding into China.”
The key word is “targeted”, as is repeated on the CFE website:
“We should help high-growth enterprises scale up and internationalise with targeted assistance, including access to networks, mentors, technology and financing. To encourage partnerships among enterprises, we should step up efforts under initiatives like the Partnerships for Capability Transformation (PACT).”
Note that I didn’t put those words in bold. The CFE did.
This is a more focused approach, compared to the previous one. Back in the days when everyone was making PIC claims, the money went out to almost any business, however small.
Now, any handouts will probably be for small businesses that aim to grow into big companies. A small textiles company that wants to expand into seven countries and ends up employing 3,000 people, would count. A niche corner shop selling hand-made ukuleles, or a specialist cafe selling only Venezuelan chocolate, probably won’t get the same degree of help.
There’s no way to dispute the reasoning here. Government props up businesses with the aim of providing employment and raising our Gross Domestic Product (GDP). Small, specialist businesses are too scattered to do that. While they may still get some help, they can forget about having the same level of support. I will explain more of this with regard to Budget 2017 later.
3. We need an environment of risk-taking and innovation but we’re so bad at it we have to fund it
According to the CFE on its website, “[the] Government should create a regulatory environment that supports innovation and risk-taking.” Again, that’s not me putting the words in bold.
We’ve had the “creativity and innovation” debate for a long time, and the general consensus seems to be that we suck at it. Apple co-founder Steve Wozniak famously put us down for that in an interview. The worry here isn’t about the government going to support test-bedding, or back up risk-takers; that’s badly needed.
What’s worrying is that, for the past few decades, we’ve been so bad at risk-taking and innovation that we won’t do it unless the government intervenes. Our fear of failure is an internalised cultural trait. That’s not something anyone can change in a short time, even with a lot of money.
There’s a whole lifetime of values involved, which begins right from our education. How many university students want to take a big risk and launch an innovative business, versus the number who prefer a boring degree and reliable jobs as lawyers or bankers?
We should be wetting our pants with the realisation that we need to be risk-takers to cope, and that we need to change our attitude right now. There’s little to suggest we’re capable of making the journey that’s now asked of us.
Follow-up via the Budget report
Next up, we’re going to look at the Budget 2017 and see where it coincides with the CFE report. Together, these two should give us a clear look at the future the government’s trying to set us on.
Although everything is couched in polite, totally-don’t-panic-tones, there’s a clear indicator that we don’t know what’s coming. And the solution to that is blunt: we adapt when it happens or we die. Our government cannot turn protectionist and shield us from foreign competition. Singapore businesses better start warming up for a long race.
Read the second part, Economic Realities: 3 harsh takeaways from Budget 2017, here.
Featured image by Sean Chong.
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