Capitalising on opportunities for growth

Dialogue participants

• Tan See Leng, Minister for Manpower and Second Minister for Trade and Industry

• Linus Goh, Head, Global Commercial Banking, OCBC Bank

Moderator: Lee U-Wen, Deputy News Editor, The Business Times

The following is an edited excerpt of the dialogue.

BT: Finance Minister Lawrence Wong delivered his maiden Budget speech in Parliament last Friday - a very bold and expansionary Budget, which he says is a first step in renewing and strengthening our social compact for a post-pandemic world. What are your main takeaways from the speech?

Tan See Leng: I think it's a very balanced Budget, one that is also very progressive . . . and a very good step forward in terms of really strengthening and renewing our social compact.

It is aimed at making sure that as we recover from this particular pandemic, we go into a new phase where we now look at how to fortify our resilience and to be able to sustain it over the longer run.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Linus Goh: In the last 2 years, businesses were forced into change in a big way. I think the signal is that going forward, there is a need to take advantage of that position and to try to capitalise on the opportunities for growth. But at the same time, there was a point about inclusion, about a more sustainable future. And so I think it's not all about business, it's also the role that businesses have in the broader society.

BT: Climate change and sustainability will once again be key issues for businesses this year, but many will still be preoccupied with short-term issues and surviving the crisis. What can be done to focus them on the need to build sustainable businesses as well as adopt environmentally-friendly practices?

Dr Tan: This transition is something that we have planned since we introduced the Singapore Green Plan 2030.

The fact that we are now moving to a new phase, where we signal our pricing of the carbon tax, actually signals to the world that we will be embarking on a sustained trajectory to achieving our net-zero emission (target) some time in the second half of this century itself.

How we calibrated and phased in the carbon tax is a reflection of the understanding of what needs to be done in helping companies: giving them time to phase in the transition to more energy-efficient processes and equipment.

There will obviously be a lot of opportunities as well in the green economy globally; there'll be millions of jobs created.

I think (for) OCBC, being at the forefront of funding, financing and so on, there will be tremendous opportunities in the green financing space, the issuance of green bonds.

(The greening of) our traditional sectors . . . would also put us in good stead to offer those opportunities for many of our Singapore workers.

BT: On the carbon tax, take us through how the discussions were reached to arrive at the phased increase up to 2030 - because Singapore will be a trailblazer in Asia, and other countries are looking to us to see how we implement it, and what the impact is.

Dr Tan: There's a cost to getting our businesses and our people to be familiar with embarking on all these renewable technologies. The setting of the carbon tax allows us to, in a graduated manner, get people adjusted to the cadence and to adopting and adapting energy conservation as a way of life.

And then to see how we can actually pivot into using more energy-efficient appliances, to even using sustainable, greener development methods in terms of construction of our buildings, employment of natural ventilation, and so on.

BT: In the last couple of years, has OCBC seen more interest from companies in sustainable financing? Beyond financing itself, what else do you think can be done to help our businesses transition towards greater sustainability?

Goh: Before, it used to be that going green was about doing good for society. It wasn't necessarily immediately good for business. But I think particularly in the last 2 years or so - in coping with the whole disruption to the supply chain, having to engage with new buyers and suppliers - the recognition that it was good for business became a lot more clear.

And so we have seen many companies jump forward, embrace sustainability, because it provides them differentiation and because it gets them the contracts.

We launched the OCBC SME Sustainable Finance Framework just at the tail-end of 2020. In one year, we had a very strong response, even from the smaller businesses - several hundred of them jumping to take a green loan.

We do see that the SMEs are signalling in a very strong way. Because many of them, themselves, are the change agents.

They are the enablers. They are the ones who are providing the R&D, the consulting, the services in climate change, in carbon, in energy efficiency, so they are helping even bigger companies like us to make that shift.

BT: With the greening of traditional sectors and emerging sectors like green finance, there will be a global demand for more talent. How can we better position our workforce to capture all these opportunities?

Dr Tan: That is also one of the initiatives that we're pursuing with the Ministry of Education (MOE). This green transition would create millions of jobs globally. It's going to be a very exciting space to be in.

So to keep pace with it, and in fact to actually leapfrog and move ahead... we are now working with the institutions of higher learning, in terms of courses for sustainability: not just environmental sustainability, but greening; employment of cleaner energy types - for instance, hydrogen; carbon capture, utilisation and storage...

BT: Linus, from the bank's perspective, are you looking for new kinds of skills and talent to come in, and how challenging is that?

Goh: The content of green industry in our clients, and therefore in our jobs, is also (increasing) at a fairly rapid pace. So we need to build up competencies to be relevant to that transition. In doing that, you're also signalling what sort of role you will be hiring for, and therefore I think that dovetails very nicely with new competencies that come up from the schools.

Dr Tan: While we grow our own timber, in the short term - in terms of giving us that push - it's also about bringing in complementary talent. Many of the OECD countries are ahead of us.

So the key thing is bringing these talented people here to complement in terms of the teaching, the transferring of skillsets and technology to our locals - and at the same time, also having an overseas global attachment scheme for our own talent. When they come back, they can then set up the whole process.

That's really what we intend to do with the Employment Pass framework, which focuses on making sure that . . . the high-calibre, diverse talent that we bring in here can actually complement our workforce, nudge them, motivate them and also train them and to bring them to the next level.

Likewise with the S Pass, we want to make sure that the right quality with the right proportions is coming in, to complement . . . and make sure that we win this competition collectively.

BT: For businesses, the upcoming tax changes and refinements to foreign worker policies translate to higher costs. How do you see this having an impact on Singapore's overall competitiveness and attractiveness as a hub?

Dr Tan: First, not only was this a very balanced budget, I think it's also quite expansionary. And at the same time, it's progressive . . . This renews and strengthens the social compact . . . It allows us to fortify that togetherness and how we can overcome future crises together. And I think that allows Singapore to become an even more attractive magnet global city to attract even more talent, even more people who are financially able to come here to invest and build together. That's the first broad encompassing part.

Now, if you look at the cost structure, that appears to be rising - rightfully so. But as the costs move, the value-addedness, the productivity will also improve, and will increase pari passu with the increase in the cost structure.

What is also comforting is that the government will not hesitate to implement all kinds of support measures necessary. So for instance, with the Progressive Wage Model, the government has come up with a Progressive Wage Credit scheme to help to offset that process of transition. For businesses, we have productivity solutions grants, company training committees . . . temporary bridging loans . . . So you've got all these contemporaneous measures to support them, to manage some of these costs. That is the third part.

Then the fourth part is taking care of the employees themselves, making sure that they're given the impetus to upgrade their skills.

Then there is the last bit, which is retirement adequacy. We are nudging our workers to continue to work longer; they can always retire any time they want to, but we offer them the opportunity to be able to extend their productive longevity. So multiple measures are in place.

BT: As travel opens up and borders start to reopen, do you see that companies still have that desire to expand overseas?

Goh: Even though businesses have - along with the rest of us - gotten used to no travel or less travel in the past 2 years, I think the reality is that travel and connecting with overseas markets is a must. I think there is a pent-up demand, a feeling of anticipation to be able to reconnect.

I know that there are many businesses who have been able to connect well digitally.

But I think they will be the first to recognise that if you are seeking new customers, seeking new partners, opening up new markets, you have no choice but to be there physically.

You spoke about Singapore being a competitive hub. I think the script is now quite different, because the whole world has been so changed in the past two years that in a way you have the opportunity to reset what it means to be a hub.

I think that the firms who are at the leading edge have found that they have become much more international by being digital. So being connected to suppliers in a much more intimate way, having good just-in-time visibility of data to be able to predict future patterns - I think that really connects them in a much bigger way.

Dr Tan: We have got quite a number of good things going for us. We have a very stable operating environment, clear open processes, strong rule of law; our intellectual property rights protection is very high. Our openness, our connectivity with the centres of the world - I think it all puts us in good stead.

We have one of the highest vaccination rates in the world. I think you can see that we're now moving to a more nuanced opening up of our borders. Like what Linus said, we also hope to see a resumption of travel.

I think at the end of the day, the trust, the social compact is most important . . . And for international investors, these are actually very important, critical success factors for them to want to plant their FDIs (foreign direct investments) here.

BT: What are your thoughts on the pace of digital transformation?

Goh: I think it goes without saying now, after two years, that we can also thank Covid for lifting the overall standards of digitalisation. We certainly have seen that in the SMEs and businesses: a significant shift towards adoption of technology, of digital tools to enable them to operate in a more effective way.

But I think it would be a pity if we stopped now and said, with the reopening: "We've done the digital thing, and that was for when we couldn't travel, when we couldn't come to work, and out of necessity we had to adopt those tools."

I think it would be a shame, and I am encouraged to see that that's not the case - the businesses are indeed continuing on the journey.

We already see in the second year of the pandemic that there's a differentiation. Those who are much more ambitious with their digital plans and outcomes - we track the performance of those companies, (and) they outstrip the non-digital or the less digital by easily four times their sales performance.

So I think it's becoming clear that if you see through that process to realise the benefits of becoming digital, it gets you to be a more progressive, successful business.

We also noticed that Singapore businesses have pivoted in a faster way and perhaps more comprehensive way than some of their peers in the region. I think that when we talk about regional roles, many of the SMEs and the companies here... can also play a more influential role in the overall emergence of the economies in the region.

Dr Tan: I think that we always think of the adoption of technology or digitalisation in a linear or curved manner, but in actual fact it is quite staccato, because sometimes you get an external shock, like Covid-19 or other externalities.

We move, we evolve, and suddenly a shock comes in and you reset higher; then you start from a different base, a higher base, and then you move along that. For something like Covid that has not just nudged but shoved everyone in a particular manner, I don't think it's possible for anyone to backtrack.

Now most meetings are conducted on Skype, on Zoom, on Microsoft Teams; I think that has actually reset itself to a new cadence in terms of how companies operate.

Improvements in terms of data analytics and artificial intelligence mean that businesses look at consumers from a very "compound" eye. Multiple facets of preferences can be gleaned and therefore (firms) can come up with new strategies in terms of business development and marketing, to have better reach and a more precise, targeted approach to the consumer.

There will be a lot more automation, deep tech, trying to be predictive and pre-emptive before the problem actually comes up, so that you can take preventive maintenance and so on - I think will be the order of the day.

BT: We are now entering the third year of the pandemic. As you look back on how Singapore and Singaporeans have gone through this crisis together, what's your overall take on how ready we are to emerge stronger in this post-pandemic environment?

Goh: My own view is that we should just get on with it. I think we have talked about it enough. We've probably over-analysed it, we've over-assessed all the different options and variations. I think we can be confident that we - as an economy, as a country and as businesses - have handled it relatively well and the opportunities are out there to be seized. So we should just get on with it and move on.

Dr Tan: I think the one thing that really stood out was the indomitable spirit, the tenacity, the resilience of the Singaporean, the Singaporean employee, the Singaporean employer; the entire social construct and the social compact that we have as a nation.

We are seeing some light at the end of the tunnel. We don't know how it's going to evolve. But I think thus far, with all the combined support of everyone... I think we should really have reason to be of good cheer, of good spirit, and hope springs eternal.