Yong Ying-I, Chief Executive Officer, IDA Singapore - Speech IPS Corporate Associates Breakfast Meeting

Yong Ying-I, Chief Executive Officer, IDA Singapore - Speech
IPS Corporate Associates Breakfast Meeting

Singapore, 10 July 2001

Good morning, Prof Tommy Koh, ladies and gentleman

1 It was not easy preparing for today's topic. A year ago, there were at least some people who were prepared to say that they understood the internet revolution and how it would change the future. The Singapore government, for one, thought that we would earn billions of dollars from the sale of 3G mobile wireless licenses, and the telcos likewise thought that they were going to pay us billions! Given the collapse of so many tech companies and telcos since then, a topic like "Can Singapore maintain its edge" is totally open-ended. So looking on the bright side, it gives me leeway to say virtually anything I like!

2 Part of my job is to help see into the crystal ball, to see what we haven't seen yet. I think Singapore is at a critical juncture in her development, and that we face significant challenges ahead. But it may not be a very balanced speech if I just focus on what worries me. So I decided to ask my staff for some ideas too. Since IDA is a developmental agency, part of our job is to market Singapore's attractions. I knew that they would come up with a list of positives. So let me start with that.

3 Singapore's infocomm sector has done very well this last year. According to the Infocomm Industry survey, the infocomm industry is a major sector of the economy, accountings for 7% of Singapore's GDP. It is a strong growth engine that grew by 30% last year to reach $26 billion in revenue. Equally importantly, B2B (business to business) e-commerce exploded to some $96 billion of revenue last year. Just a few weeks ago, Singapore's companies dominated the Telecoms Asia Readers Choice awards. Singapore Telecoms won the Best Asian Telecoms Operator for the fourth time, while Pacific Internet was once again voted the Best Asian Internet Service/New Entrant award. Oh yes, Minister Yeo Cheow Tong was voted Asia's best telecom minister. We have been rated by Accenture, in a widely respected survey, as the 2nd best e-Government in the world, for the 2nd year running. Singapore has 3 out of 100 companies in Red Herring's top 100 coolest companies this year. Red Herring is the most read IT and internet business magazine in Silicon Valley; and as you might expect, some 90 out of 100 "coolest" listings are US companies; Singapore was one of the few countries to even have any companies mentioned inside. One more interesting recent award - one of our leading IT entrepreneurs, Lim Kwee Enn (Chairman & CEO of Knowledge Engineering) has just won the Albert Einstein award, which she will go to Jerusalem to collect. I gather that she beat out very famous people like the CEO of AOL Time Warner.

4 As most of you will know, we decided to bring forward the rapid liberalisation of the telecom sector to Apr last year. It was a difficult decision - the government paid a lot of compensation to SingTel and Starhub as a result. But the liberalisation has paid off greatly. You know that IDD rates for consumers has dropped dramatically, in some cases as much as 85%. More importantly, Singapore was not an attractive place for investments from US and Europe across the communications, media, and internet services business 18 months ago. The liberalisation and the opening up of the market has changed that. We have now regained our competitiveness against Hong Kong, Sydney and Tokyo - the top tier of competitors in this business - across the infocomm value chain. This means data centres, content aggregators, digital media industries, internet networking companies and e-commerce transaction hubs. Singapore has attracted many product development labs and competency centres. We are now even attracting a wave of inward investments from top IT Indian companies, with Satyam, Tata Consultancy Services and Infosys opening regional offices in Singapore. All these are important to Singapore because they mean good jobs in high value businesses.

5 What do these tell us? They indicate that the Government's strategies to propel Singapore into becoming a premier infocomm hub in Asia have been effective. However, there is a saying that reciting all of one's past achievements is like driving by looking in the rear-view mirror. It may make you feel good, but it does not tell you anything about how we will do in future. I found a picture that perhaps captures this!

6 What might lie ahead? I believe that the competitive landscape will be very challenging going forward. First, Singapore has been competitive in infrastructure, in our legal system and government services, in executing efficiently and transparently. But other countries are "getting it". We have been seeing something called policy convergence in recent years, where more and more countries are copying best practices. So best practices will not yield much of a competitive advantage going forward. Second, IT and comms are businesses where many companies and countries are at the same early stages of development, and the future is up for grabs. So being No 2 or No 1 in e-Government is quite meaningless in terms of predicting how we will rate in 5 years' time because other e-Governments can catch up and overtake us if we move at the pace we are comfortable with.

7 John Chambers, the CEO of Cisco Systems, noted, "the 2 equalisers in life are the Internet & education. With infrastructure and the right education, you win". With today's technology enabling physical infrastructure to be laid relatively quickly, and it being possible to attract people with the right skill set if you offer the right incentive, developing countries can catch up rapidly. What do you think this means for Asia? The 2 developing countries in Asia with weak industrial age infrastructure, but large pools of highly educated and low-cost people are India and China. India IT has openly declared that it wants to be a global IT superpower by 2007. China just wants to be a superpower. Period. Low-cost and capable is a dangerous combination. Any visit to the IT companies of Bangalore and Shanghai will leave you in no doubt of their capabilities and their ambition. This does NOT augur well for SE Asia, where education attainment is much lower. SE Asian countries will increasingly not be attractive to MNCs looking for production locations. Since Singapore is in SE Asia, we cannot avoid being affected by weak economies around us.

8 There is a theory that the Knowledge age is in fact good for Singapore, because geographic boundaries matter less. In the industrial age, we were hampered by having little land and labour, and no raw materials. The theory is that in the internet age, you can do business globally from anywhere. With good service offerings and good global logistics, we can do enormously well. It is possible to overcome our geographic limitations. I think this theory is half-correct. Our B2B achievements last year show that we have achieved good innings so far. But local enterprises will tell you that reality is tougher than that. Internet success requires the ability to scale up, rapidly. A homogenous and huge US market has been very important to the success of US companies. Asian companies are hampered by the fact that Asia is a series of micro-markets. Reaching into each of these is relatively expensive and difficult. Singapore companies, with only a tiny domestic market, have particular difficulty because many are not ready in terms of their management experience and capability when they first venture overseas out of necessity, and many have a very hard struggle.

9 This leads me to the issue of "what are the key factors that will keep Singapore competitive" going forward. We may continue, for some time, to attract global multinationals in the infocomm sector to locate their regional hubs here. But knowledge industries are about IPR creation and MNCs will eventually choose to also locate where there is a hive of activity around creativity and innovation. I therefore believe this second wing - the development of local enterprises in the infocomm sector - is critical to sustaining the first wing of inward investments by global leading players. To me, it is a big challenge whether we can nurture homegrown world-class enterprises in this sector.

10 Many people like to criticise Singaporeans as not being creative or innovative. I personally do not agree. We have many great examples of things made in Singapore. The HP Jornada was totally designed, developed, and globally marketed and distributed out of Singapore. It was a Singapore broker that appears to have launched the first mobile stock trading capability worldwide. It was a Singapore company that invented the first colour WAP micro browser for the Palm OS. But Singaporean enterprises may be missing some of the other skills to build global companies.

11 IDA has been doing a lot of re-thinking lately, about how our local enterprises can go international. Here are some of my preliminary thoughts. First, our greatest strengths appear to be in the areas that we are already strong offline. In other words, in banking and finance, in logistics, in education and healthcare. That's logical -- if we are not particularly good at doing a business in any case, it is hard to see why we would be good at doing them online. Second, the strategies for going global may have to be re-thought. Companies might be better off working through MNC partners who can pull them into other markets, or they might chase logical business connections in their specialised space, instead of just setting up offices in Malaysia or Hong Kong or Korea, and doing cold-calls door to door. One of our software companies in the banking space captured its first few big contracts in S Africa and E Europe, before selling to other countries worldwide. I gather that notwithstanding a long list of established clients worldwide, the local banks have still not become its customers.

12 IDA can produce more initiatives and schemes to help grow our companies. But let me touch something more fundamental in terms of what I think we need to do, to stay ahead. I talked about how we brought forward our telecoms liberalisation, and how we regained our competitiveness in the first place. The question that goes with it is "why did we not realise it earlier?" You won't hear this often in public but I think it is fair to say that we - the government - dropped the ball on this. The 2 agencies that now make up IDA were in different ministries and covered different subjects involving different groups of businesses. Within each eco-system, the signals to change were not obvious. If you like, we were driving by the rear-view mirror. Ireland, which became competitive very rapidly, and Hong Kong, saw the need to bring together the 2 sectors first.

13 It is worrying that it happened, but it is not surprising in the IT and internet world. Let be cite a famous example - the PC industry. IBM dominated the mainframe market but missed by years the emergence of minicomputers. Digital Equipment Corporate created the minicomputer and was joined by aggressive companies like HP and Nixdorf. But each of these companies in turn missed the desktop PC market. It was left to Apple Computer, together with Commodore and Tandy, to create the PC. Yet Apple, a company particularly well known for being innovative, lagged 5 years behind the leaders that brought portables or laptops to the market.

14 The irony of this story is that the very success of these companies was a big part of their eventual failure to keep up with changes brought by disruptive innovation. This is a famous analysis covered in the seminar text, "The Innovator's Dilemma" by Clay Christiansen. It argues that the signals that a successful company gets from customers, revenue figures from mainstream lines, makes it particularly difficult for its management to see how big an innovation that totally disrupts the industry might be. It is not that their managers were weak, or bureaucratic, or not reading the market. But managerial incentives do not allow them to cannibalise mainstream markets for some high-risk and uncertain future. Managers can be damned good......and still drop the ball.

15 To me, this is Singapore's real challenge. Can we "unlearn" what we know to have worked well yesterday, and learn open-mindedly what is happening today, in order that we can be at the forefront of tomorrow? The saying, "if it ain't broke, don't fix it" no longer holds.

16 It is easier for me to criticise the government than the private sector, so let me give you 2 examples from the government and the infocomm industry, which may help illustrate my point. The first is that to enable phone lines to be laid, one has to dig up the streets. One has to get approval from many, many agencies to dig the streets. Naturally, it takes time. Recently, I heard that the entire city of Hangzhou had been wired up with broadband in 3 months flat. How was this done? Wires were thrown over the rooftop. Now, why was the rule that wires had to be underground in place in Singapore? Because of aesthetics. Aesthetics has a cost, in implementation and in time taken. I am not suggesting at all that we ought to throw wires over rooftops. There are serious policy tradeoffs. But resolving them takes time. A country that does not have all these perfected rules in the first place, can actually move much faster in implementation. But this is the competition that Singapore is now up against. I am wondering how we can build the capability to periodically revisit our multiple rules and policy tradeoffs and have the courage to ask if we need to change long-held assumptions.

17 My second example concerns smart cash-cards. The general consensus is that the use of cash-cards for micro-payments in Singapore has been slow to take off. Apart from NETS, government presently does not allow multiple-use cards, only single-use cards such as MRT cards or phone cards. We have been debating for a number of years as to whether the new LTA smart cash-card can be used more widely like the NETS cash-card. There are legitimate concerns with deposit taking, credit risk and so on. Now in Hong Kong, Creative Star's Octopus Card, which is the stored value card for the public transport system, has been developed into an electronic purse which can be used for purchases at convenience stores. On the regulatory front, Hong Kong's Monetary Authority is equally concerned with the deposit-taking and credit-risk issues of allowing it to expand beyond the transport system. But HKMA decided to allow Octopus services to proceed with multiple uses so long as the volume of transactions originating from non-transport purchases in restricted to less than half of total transactions. This would allow HKMA more time to study the issues, and learn more about the business from the initial months of use, while not holding back implementation.

18 I abstract from this an interesting theory about our policy making approach. As a government policy person, I can testify that government officials to be 100% certain, and the policy frameworks perfect and foolproof, before we implement them. But this takes time. And it is peculiarly hard to do policies for emerging businesses that we don't understand; so it takes even longer. However, excelling in the internet age requires businesses to move rapidly. Perhaps policy makers in this dynamic environment may have to learn to be more daring, to allow business to start on a limited basis even if we have not figured out the full set of policies. It may be important to give the market some room to test and learn - what is called in internet parlance, a "sense and respond" strategy.

19 At the recent wireless International Advisory Roundtable, a wireless expert suggested something interesting to IDA. He said that our schemes were good, but Government was not taking enough risks. We do not take bets on technologies or specific business areas. He pointed out that with these sorts of schemes and programmes, Singapore would definitely be a player and a competent one. But if we wanted leadership, we would need to take more risks, to take bets. Food for thought.

20 I would like to conclude this morning's talk by quoting a saying from Anon: "Beware the craftsman who claims 20 years of experience. It's often just 1 year of experience over and over 20 times." In the knowledge economy, where unlearning and learning is the key requirement, this strikes me as particularly apt. Thank you very much.

Title Date of Issue
Meeting Slides (603.39KB) 10 July 2001

Last updated on: 13 Mar 2023