MEMBER companies of the Singapore Business Federation (SBF) are "not so well prepared" for changes to Singapore's economic landscape, says its chief executive officer Ho Meng Kit.
While he agrees with the government's push to transform Singapore from a value-adding to a value-creating economy, Mr Ho concedes that companies here are still a long way from being able to cope with such a shift.
"Already, getting them to do (raise) productivity is hard. So to get them to do value creation means investing in innovation, using technology to scale," Mr Ho told BT in an hour-long one-on-one interview.
With more emphasis on creating innovative products and services, Mr Ho stressed that companies will have to form new partnerships beyond those they are currently used to.
"On the tech side, the partners will not necessarily be Spring Singapore - it will have to be more A*Star and researchers. So companies will have to learn to form new partnerships in a value-creating economy," he added.
The push for a shift to value creation was recently articulated by Finance Minister Heng Swee Keat. Speaking at the Semi-Centennial Leadership Conference organised by SBF in November, Mr Heng said Singapore cannot simply produce what the world is producing and expect to command a premium or sustain its competitive edge.
"We have to produce what the rest of the world is not producing - or, at least, not much of. To do so, we have to build deep capabilities and linkages - in our companies, in our industries, and in our economy - to create new products and deliver better solutions, in cost-effective, innovative ways," stressed Mr Heng.
Chip cleaning example
This is in contrast to a value-adding economy, which looks at what products, services or ideas already exist, and then proposes improvements to add incremental value.
Mr Ho gave the example of a new method used to clean semiconductor wafers. While chips are typically laid flat for cleaning, a new technique allows chips to hang vertically. This means that cleaning machines can be reduced to one-third of the original size, resulting in space and cost savings.
While the technique was not invented on home soil, a Singaporean investor has a stake in the firm and intends to bring the technique here and also take it to other markets.
"So it doesn't need to be a made-in-Singapore product, as long as we own it and it's a unique process that can be scalable," said Mr Ho, emphasising the importance of intellectual property rights in the quest for value creation.
He added: "Companies also need to set a culture that allows entrepreneurship to come up from within . . . That's not going to be done overnight, so I think there's a lot of work going forward."
Still, corporates aren't the only ones who will have to undergo a mindset change. Mr Ho said the Singapore government, too, should become "less prescriptive" with its regulations, in order for innovation and creative disruption to thrive.
He cited the example of the car-sharing app Uber. In his view, the government should not introduce more rules to regulate such services, as long as there are no issues of public safety.
Protecting incumbent interests
"Why not just let it be? I use Uber. It's cheaper, I can pay by credit card without a surcharge, the cab driver doesn't get lost because he uses Google Maps - it's a better experience. So if the customer is happier, why do you want to introduce or think of proposing new rules?
"Why? Because you want to protect the interests of taxi drivers or taxi companies, the incumbents."
He echoed a point made in a recent commentary by Donald Low, associate dean (research and executive education) at the Lee Kuan Yew School of Public Policy: "Uber and GrabCar are unlikely to be the last of the technology-driven innovations to disrupt the domestic services sector in Singapore. Our regulatory position towards these car-sharing apps - as unimportant as they may be to our overall competitiveness - sends an important signal of whether the authorities in Singapore stand on the side of competition and consumer choice, or on the side of regulation and protection of incumbent firms."
As the Committee for the Future Economy (chaired by Mr Heng) embarks on its year-long quest to review Singapore's competitive edge, Mr Ho believes it is timely for the government to reassess how it can improve the momentum for entrepreneurship - starting with its own commitment to allow disruptors in the marketplace. "The government must be prepared to not be so prescriptive, and public officers (should) design systems to be more accepting of risks," said Mr Ho.