Saturday, 5 May 2012

Staying open has served S'pore well

May 4, 2012

Prime Minister Lee Hsien Loong spoke about Europe's troubled economies in his May Day Rally address on Tuesday, and stressed the need for Singapore to remain open to talent
IN EUROPE, many countries are in trouble. Why? Because welfarism has failed. The idea that the government will provide everything has not worked. Workers have too little incentive to make the effort. Their jobs are protected - which means it's very hard to discipline the workers, very hard to let the workers go when conditions change, very hard to drop the workers when they are not putting in the effort.

So the employers think: 'It's so hard to let the workers go, I'd better be very careful before I take the workers on.'

So the employers are reluctant to hire, fewer jobs are created. The population is ageing. Their pensions are paid by the state. It's a very heavy burden on the state, becoming unaffordable.

You take just one example: In Italy, the amount which the Italian government spends on pensions in one year is almost equal in percentage of gross domestic product to the amount the Singapore Government spends in the Budget every year for everything: education, health care, defence, housing, transport. Add them all up together, it's 58 per cent of GDP, same as what is spent on pensions in Italy.

You can't afford this. The countries have too much debt, investors no longer are willing to lend them their money and so they are in crisis. The stagnation is going to last, unemployment is well above 10 per cent - for young people, much worse. In Spain, 24 per cent unemployment - one-quarter of their adults are not working, and among the youth, 52 per cent are not working - more than half.

So you can imagine somebody who has no work leaving school and for 10 years, you have no work; by the time he's 30, how does he start finding a job, looking for a job, learning how to be in a job and starting his working career?

So it's a crisis. People are very upset, upset with the world, upset with the government. So many governments have fallen. All along southern Europe, they've changed governments: Portugal, Spain, Italy, Greece - all gone; Holland, recently, coalition collapsed; Romania - as I was writing this speech, I had to add it to the list because the government fell down. France, last weekend, first round of elections, (President) Nicolas Sarkozy is trailing. Second round, this weekend, he may lose. So the continent is in crisis.

In America, the situation is not so bad but there are many concerns over social safety nets too. Health care, which we worry about, they also worry about: It's extremely expensive, expensive to the individual who buys state insurance, expensive to the state that must stay on the federal budget for Medicaid, Medicare. Their social security system, which is pensions, is also bankrupt, but they can't reform it - politically it's impossible - so the budget is in chronic deficit and they have no money left to invest in education and infrastructure, in growth, in their people.

If you look at the emerging economies - China, India, Vietnam - they are still growing and creating jobs, but they are not without their own worries and headaches. In China, there's worry about income inequality, especially between the coastal cities, which are prosperous, and inland areas, which are not doing so well. They are worried about economic restructuring because they know they have to do better every year, but they can't keep on doing better without changing the way the economy works. They are also worried about the ageing population and the shrinking workforce, because there's not enough babies, and they worry they may grow old before they grow rich.

The moral is, every country has its own problems. Many of these problems are similar to ours. It's inevitable because of globalisation, because of technological progress affecting us all over the world.

We are not in an ideal position, certainly not perfect, but I think we should see our progress and our problems in perspective. On balance, I think we are in good shape to tackle the problems, but we must get our strategies right.

The first strategy is to keep Singapore open and embrace the world; be open in our mindset, be an outward-looking confident society, willing to change, welcoming competition, willing to consider new ideas and explore new opportunities. That's how we've become a successful and cosmopolitan city. That's how we've competed against bigger countries and held our own. That's how we can stay abreast with the changes, improve our lives and secure a bright future for our children here in Singapore.

So when it comes to trade, we're prepared to do business with anybody - Trans-Pacific Partnership with America, Australia and so on, we've joined in. FTA (free trade agreement) with the European Union, with all their problems, we still want to do business with them. Let's see how we can get a win-win relationship going. We open ourselves to the world, to business.

We also welcome talent, an attitude which has served us well. The Hong Kong TV channel TVB spoke about our policies here and admired us for it. Many people come to Singapore to live, work or play. They are impressed by Singapore, they go back home, they promote Singapore as a place with opportunities to prosper. New Zealand Prime Minister John Key was here recently. He lived and worked in Singapore in the mid-1990s for Merrill Lynch. His son was born here and he remembers Singapore fondly, especially East Coast Park and the chilli crabs and pepper crabs, which he still goes back for every time he's here. Now he's PM of New Zealand, pursuing more cooperation with Singapore, which will benefit us, in food imports and for the education opportunities in New Zealand.

An open attitude served us well, and we need not just small numbers of top talent, but a wide range of foreign professionals and skilled workers. This remains a hot issue for Singaporeans because they worry about overcrowding, competition for themselves and their children, about different social norms, language and so on.

I posted an article on my Facebook page about Germany facing this problem of foreign talent. They don't have enough workers, their economy is prospering, they need engineers, they need IT people, they are importing some from southern Europe, where there are no jobs.

In the long term, this is going to be a great help to Germany to strengthen their industries and build them up as an economic power. But it's going to weaken the countries who lose these talent. And the Spanish are worried that one day they will end up doing nothing except tourism and agriculture. But the Germans also face problems because the foreigners come in with their different language and culture, and they can't fit in with the Germans.

The Germans say 'Herr' to one another, Mr so-and-so, very formal in their engagements. The southern Europeans are very informal in their engagements. So there's that clash.

I posted this to trigger some thought among Singaporeans that, hey, we're not alone in our problems. It attracted hundreds of comments, many heartfelt and thoughtful ones from readers. People are clearly seized with the issue, trying to see how we are different from Germany, what problems we're facing in Singapore.

So it's an issue, but it's a strategic issue for Singapore which is important for us to get right.

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