Turning the Covid crisis into an opportunity of a generation

Dialogue participants

• Chan Chun Sing, Minister for Trade and Industry

• Linus Goh, head of global commercial banking, OCBC Bank

Moderator: Wong Wei Kong, Editor, The Business Times

BEYOND short-term aid, Budget 2021 placed a clear focus on how Singapore must emerge stronger from the Covid-19 crisis.

In The Business Times Budget Dialogue 2021, presented by OCBC Bank, Minister for Trade and Industry Chan Chun Sing discusses these future opportunities with OCBC Bank's head of global commercial banking Linus Goh. Here are edited excerpts from the hour-long event that was conducted on Tuesday.

BT: I would like to start by asking the minister for his overview of the current state of play - where does he see the green shoots of recovery, and where are the areas that are still of concern?

Chan Chun Sing: Overall, there are still quite a few downside risks that we have to navigate for this coming year, not just for ourselves but as part of the global economy.

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

First would be how the pandemic unfolds: the rate of vaccination and whether there is further mutation.

The second downside risk has to do with big power geopolitics: whether it will lead to further bifurcation or fragmentation of the global economic system, and perhaps more importantly, the fear of bifurcation or fragmentation of the global digital commons or technological standards.

For Singapore, we hope that various countries in the region will continue to do well, but we are of course aware that they have their own domestic challenges.

Having said that, I think we have to make the best of times. I think there are also opportunities for ourselves in the coming year, and if we position ourselves carefully, then we will be able to turn the crisis into an opportunity for ourselves, and even an opportunity of a generation.

The pandemic has disrupted many supply chains, but therein lies an opportunity for Singapore to position ourselves well.

There are a few things that we have done well. First, during the pandemic last year, we have strived to keep our supply chains connected and continued to perform our role as a global hub for both financial services and physical trade, and that has actually strengthened our position.

The second thing is that we have not imposed any export restrictions, and that has also earned us a reputation as a trustworthy partner. We may also become one of the hubs for vaccine distribution.

On the global geopolitical uncertainty, I think increasingly companies are looking for places to plant their investments for the long term, where they can ride out any short term vagaries of the geopolitical situation.

This is where we can play to our strength. Increasingly, while costs of labour, costs of land will still be important factors in where people site their investment, a lot of MNCs - especially those in the industries that are knowledge-intensive - are looking for places where they can mobilise capital in a trusted jurisdiction, they can aggregate talent from all over the world and they can protect their intellectual property (IP).

So if we are able to do these three things well on top of managing the cost structure, we will stand a great chance to do well in the Covid and post-Covid environment.

On the specific areas of green shoots, many people talk about the ICT industry, professional services, biomed and so forth.

But I have a slightly different perspective: that across the different sectors, there can be green shoots if we are able to identify the critical nodes where we can entrench ourselves and avoid being easily displaced.

For example, in the semiconductor industry... when you go up the value chain, it is about who is able to have the IP to produce the machines... And within that ecosystem of IP, there are some very specialised equipment and machinery, including test systems, that not many people have.

Linus Goh: I definitely agree with the idea of not only looking at sector-level green shoots. What we have observed is many companies being able to take advantage of opportunities.

So even in the traditional industries of wholesale trade, for example, being able to move faster to look for alternate supplies, to be able to seek out new markets in the process of digitalisation and switching to e-commerce, they became more relevant.

Mr Chan: I agree with Linus that geography is increasingly becoming less important a consideration, and the ability to connect digitally across the same platforms and standards becomes even more important.

That is why we are striving very hard to have a series or network of digital economy agreements, so that we can leverage on the digital economy and really reach out to markets and hinterland beyond Singapore.

BT: Before the crisis, there was a great push for Singapore companies to go into overseas markets. You mentioned the new ways in which they can do so now through the digital economy. Are there plans to help companies further to enable them to do this?

Mr Chan: I think there are a few ways that we can do this much better. The first and obvious one is that we can use the cyber domain to reach out to markets beyond Singapore.

The second thing that I think we can, and should do better, is to leverage on other networks. Recently, I was at SBF (Singapore Business Federation), where they had the GlobalConnect@SBF programme.

Some micro companies in Singapore have a very limited range of products, so it is very difficult for them to penetrate the foreign market. They were able to come together, aggregate their products and services, and present an aggregate package for customers.

There was also another initiative on the manufacturing side, this Southeast Asia Manufacturing Alliance, whereby established real estate companies like CapitaLand use their overseas network to help our manufacturing companies move overseas.

Then there is the third aspect of it, which is that we can better make use of our network of consular offices overseas and trade offices overseas.

BT: Given that there are these new digital avenues of growing the business, the old concerns of manpower, rental costs, and funding access - are they still as important as constraints?

Mr Chan: I think every business will need to control its cost structure. But increasingly what I have heard from those companies who have gone overseas is that controlling the cost structure is necessary but not sufficient. It is a bit of a defensive move.

The real offensive that they need to do is to grow the top line. So when we scale, the question is how can we increase the topline disproportionately compared to the cost structure.

BT: Linus, from the companies you have been working with, what is their experience of this? Is cost still very much on their minds or are they looking beyond that, at how to change the business?

Mr Goh: It's very difficult to find one answer that fits all, but I would cite examples from some of the emerging enterprises that we have worked with.

They start with a global mindset. And therefore, their frame of reference is very different from a traditional company transitioning. They start with the view that they need to have a scalable model.

Mr Chan: In my recent conversations with manufacturing firms and professional services firms, it is the speed to evolve that has become an important concept.

In the past, it would take perhaps a few months or years to develop a new production process. But today with artificial intelligence, they are able to crunch this development time from a few months to a few days even, and sometimes a production process from a few years to a few months.

The speed to evolve new products and services has become a key competitive advantage compared to the traditional competitive advantages of cost control and quality of products.

I think those are still important, but the question is how do you marry it with the new technology, as they call it, Industry 4.0.

On the professional services side, including the financial services, the speed of evolving new products with some of these new fintech firms is pretty amazing.

They no longer just serve the conventional market segments, but they are constantly using the data to try and discover new market segments, and to see what are the new needs that are underserved that they can use the new business models to reach out to them.

The government must develop rules and regulations that are really enabling - not a defensive kind to prevent bad things from happening per se, but also a progressive kind that enables better things to be tried out for the market. Besides the speed to evolve, it is the speed to market that is very important.

BT: From the government side of the equation, will there be a shift to enable this speed to market?

Mr Chan: One good example will be what the MAS (Monetary Authority of Singapore) is trying to do with the regulatory sandboxes: to allow people to try out new products and services, and yet at the same time, ensure the overall financial system's stability.

So far, they have done quite well and we must be able to extend that similar concept to other domains beyond the financial services. For example, in the manufacturing sector: how do we evolve products, and have them qualified, certified at speed.

One of the other interesting domains that we have to work very closely with is the biomed sector, because many new products come online much faster than in the past.

The question is: how do regulators work with the industries to know what is the cutting-edge technology or science available, and allow different products to clear the necessary regulatory hurdles?

That will be a competitive advantage for Singapore as well. If we get that system right, even things that are not produced here might want to have their IP or their trademark registered here, and to use Singapore as a platform to penetrate global markets.

Singapore has quite a brand name as a trusted standard, or a reference customer, when it comes to standards - and that can play to our advantages.

BT: One thing that has come up in recent years is climate change and with the launch of the Singapore Green Plan, that is very much in focus. OCBC has been quite active in introducing green financing, launching green loans. What is the response of companies to this?

Mr Goh: I think in the initial years, there was an awareness, but there was some passive resistance, because issues of the day took precedence.

But today, if you look at it, there's actually quite a high awareness, particularly in Singapore. They've discovered markets, customers who require standards to be fulfilled.

It is in the context of that that we put together, at the end of last year a framework to enable us to offer sustainable finance to SMEs. While the awareness and the interest is there, we felt that as a financial institution, we need to play a part in helping to make that move much easier.

Mr Chan: I think this will be an area of growth for Singapore as well.

Singapore has some of the solutions that can be exported to the rest of the world, be it water management, energy management, the design of buildings in a much more sustainable way, or even using our brand as a trusted player to develop things like a carbon trading market in the future.

There are many areas where we can have an edge in this "green economy". I think we are pretty excited and are going to invest more of our effort to do this.

For an alternative energy-deficient country like Singapore, if we can manage our energy consumption and production and distribution well, then there will be many reasons for other cities to be able to consider our model and to see whether some of these solutions are exportable.

When it comes to green finance, one of the challenges is how do you have trusted and verifiable standards. Therein lies the advantage of trusted jurisdictions like Singapore.

Last but not least, I think one of the biggest challenges in this green economy and especially after the Covid-19 pandemic is the realisation that we all need to secure quality and safe food supplies and medical supplies and do it in a sustainable way.

So, again, these are areas where we are going in on the agri-tech side, not just to compete on the basis of costs but compete on the basis of sustainability and quality.

BT: Looking at the scale of the transformation that we are talking about, clearly, there'll be casualties. How do we handle the casualties that will come out of this process?

Mr Chan: Whether we use "casualties" or whether we use "recycling of our capital and labour", I think in a market economy that will always happen, because with or without the pandemic, there is always a certain churn.

The question is, how do we help the churn to be much more efficient, in the sense that if people really need to, they can quickly pivot out of the sector and not lose time and not waste resources - and more importantly, then how do we help them get into the new sectors. And this applies to companies and to workers.

BT: When you look back a year ago, when the crisis was just about to break - what were your fears and expectations? How have these changed over those 12 to 13 months that we have been trying to fight the crisis?

Mr Goh: If you look back one year, I would say that some of the changes, the evidence of companies adapting - we experienced record rates of digitalisation in banking activities and even in the adjacent activities of invoice, commerce and all of that - was much more than we anticipated.

Mr Chan: I think we went through perhaps two phases last year. When the crisis first broke, it was really about survival: how do we keep our system going, how do we keep our people fed, you know, when supply chains were breaking down, and how do we get our economy going and continue to be able to produce things and sell to the world. So that was very much the survival mode perhaps from February to about August.

I remember a turning point for myself, when I was briefing my GPC (government parliamentary committee). I think it was (Lim) Biow Chuan who asked me this. He said, 'Okay, Minister, after you told us all these things, after the various Budgets, we need to do this and that - what do you want us to do? Where do you want us to get to, what is the rallying call?'

I said, "I want us to emerge stronger." And then, after that it became a bit of an internal rallying call for my team in MTI, that we are not just in survival mode. We are going to turn the corner, we are going to look for the green shoots, we're going to look for the new opportunities and position ourselves ahead.

• To view highlights of the dialogue, scan this QR code:

​​