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CFE hits most of the right notes
LOOK at the age we live in. A computer can beat the world champion at chess, backgammon and Go. Cars can drive themselves. Humanoid robots can successfully counsel autistic children. Data analytics can predict the risk of diseases in entire populations. Having a job can mean performing tasks for multiple employers that change all the time. Startup companies armed with digital technologies can destroy the business models of 100-year-old corporations. Companies with no physical assets to speak of can dominate entire industries that abound in physical assets.
This is the world that the Committee on the Future Economy (CFE) is looking to help us navigate, and its report comes not a moment too soon. It also comes at an ominous time, when the system of liberal global trade is under threat.
The CFE report sets out some ambitious objectives: We need to deepen and diversify our international connections; acquire and use new skills; help companies innovate, transform and scale up; build and adopt digital capabilities; develop an urban infrastructure for the future and forge partnerships - internally and externally - to foster innovation and growth. This is a wide-ranging list. In many of these areas, the report's proposals are sensible and imaginative - as with the novel and intriguing ideas to build "a global innovation alliance" and develop joint labs for data analytics with industry players. Even if a few of its recommendations are put into practice, the result would be transformational.
The CFE's emphasis on the need to focus more on Asian economies is particularly important. Asia is, and for the foreseeable future will remain, the world's fastest-growing region. The protectionism that is on the rise in the West does not resonate in Asia. Besides resorting to protectionist measures such as the Trump administration's proposed "border adjustment tax", Western economies are turning increasingly to technologies such as robotics and 3D printing, which narrow or neutralise labour cost differentials, to "re-shore" manufacturing back to their home countries.
By history, connections and formal trade links, Singapore is also well placed to do business in the region. But it must deepen its understanding of Asia to a more granular level - reaching out to sub-regions, states, provinces and cities. It must especially enhance its connectivity with Singapore's immediate hinterland of Johor as well as Batam and Bintan so that companies have easier access to lower-cost land and labour. It must innovate for the burgeoning consumer classes of China, India and Asean, not just cater to supply chains that end in G-7 markets. Some MNCs based here and local companies are already doing this. We need to multiply their number.
But in some areas, there are questions around whether the objectives of the CFE report and the means set out to achieve them are sufficiently bold, realistic and comprehensive.
Take the idea of developing "deep" skills. The report makes some far-reaching proposals: Develop modularised training; a one-stop training, education and guidance portal and encourage more company-based training - on top of what we already have, such as the SkillsFuture scheme and an educational curriculum that is admired by the world. But what seems implicit in these proposals is that we must rely overwhelmingly on local talent.
However, many of the "deep" skills relevant to the future economy (actually, the present) such as data science, cybersecurity expertise, artificial intelligence, robotics, software innovation, the development of complex algorithms and user-experience design are at a nascent stage in Singapore but are already available elsewhere at advanced levels. We can ill afford to wait until our domestic skills in these relatively new areas are mature enough to be internationally competitive, which could take years. The disruptors of our businesses - who use the best skills in the world - are already at our gates. We, too, need state-of-the art "deep" skills - now and in significant numbers - in our companies, financial institutions and government agencies. Surprisingly, this urgent need for advanced skills from overseas gets no mention in the main CFE report. Only in one of the subcommittee reports in the Annex is there a one-sentence recommendation: "Singapore must augment local talent with foreign talent possessing specialised skillsets." But at least in the initial stages, advanced foreign talent will need to lead the way, not just be an add-on.
We must re-open our doors to such talent, even if through the mechanism of fixed-term visas that do not lead to immigration. We need to reverse the nativist sentiment that has taken hold over the last five years among not only sections of the public but also some of Singapore's intelligentsia and politicians. We must send a positive signal to the world that such skills are wanted and welcome. Companies must be free to go and seek them out, secure in the knowledge that they will be allowed to hire.
This will amount to a change - certainly a change of emphasis - in the government's manpower policies, which many companies suggest are still excessively tight, which is already reflected in the pattern of unfilled job vacancies, for PMETs in particular.
In some of its ambitions, the government may need to be modest and circumspect in what it can achieve. One relates to "industry transformation maps" and the targeting of clusters.
Industry transformation maps are best plotted by industries and companies themselves. For example, it is unlikely that the radical transformation of the advertising industry by search (Google) and social networking technologies (Facebook) over the last decade - which stunned even industry insiders - would have been foreseen in a government's transformation map. Ditto for the big changes that occurred in the hospitality industry (Airbnb) and the taxi business (Uber), and are underway in financial services (Blockchain and other technologies), where a revolution with unpredictable consequences is in progress. Industry transformations typically happen organically, driven by audacious entrepreneurs, fast-changing industry ecosystems and receptive consumers. The best governments can do is provide an enabling environment in the form of infrastructure, information and outreach, access to skills and financing as well as appropriate regulation.
Promoting industry clustering, where companies gather together in close geographical proximity, is a worthy goal, but in today's world of disruption, rapidly changing technologies and capabilities, the configuration of future clusters and their members cannot be discerned in advance - something the CFE, to its credit, recognises. It notes, for instance, that "new industries that straddle or do not fit into existing classifications will emerge, and create new links between existing industries", citing as an example the wearable technologies industry which brings fashion and healthcare into the same cluster. Thus in many cases, clusters will form, but their configuration is unpredictable. They will be recognised as clusters only in retrospect.
So while the scope for activist industrial policy will be limited, where the government can play a useful role is in catalysing growth capital for the private sector (by providing some itself where there are market gaps) and in opening new markets and sectors for companies, especially in the region.
As for what is missing in the CFE report, one broad area that gets scant coverage is social policies, which need to be part of any blueprint for the future economy, too. One of the issues we are already grappling with and which will get more challenging with time is an ageing workforce. The share of resident workers aged 60 and above hit 13 per cent of the labour force last year, more than double the 5.5 per cent recorded in 2006. The proportion will continue to rise and by 2020, the number of working age residents will start to decline in absolute terms, depressing economic growth and living standards.
To deal with this problem, we will need to go beyond incremental measures, such as changes to rules on the retirement age and re-employment and retraining. Unless we can count on a quantum leap in productivity - a doubtful bet - we will have to revisit what some observers, such as the entrepreneur and former Nominated Member of Parliamant Calvin Cheng, have described as the "elephant in the room" issues of population and immigration. These were swept under the carpet after the negative public reaction to the government's Population White Paper of 2013, but they cannot remain there. The CFE report would have been more complete with a discussion of how best to tackle the issues around our ageing workforce.
Safety nets are another area of social policies relevant to the future economy. In future, economic disruption will hit workers at all levels - not just blue-collar, but also white-collar and managerial. Technological changes are also likely to exacerbate income inequalities. How will we deal with these problems? We will need to go beyond the arrangements we have in place today, such as the Workfare Income Supplement and ad-hoc assistance schemes which are targeted mainly at low-income workers. Some social scientists have come up with more radical suggestions. For instance, the economist Anthony Atkinson of the London School of Economics has proposed that a "basic living wage" - which is higher than the minimum wage - for all, as well as a minimum inheritance at adulthood, would help secure social stability amid tumultuous change and reduce disparities in income and wealth. We must examine these and other ideas in our own context.
Changes in corporate culture, management and mindsets will also be needed. One especially important issue here is the demographic profile of those who run and manage our companies. Whether by tradition or design, most companies are still dominated at the top by people in their late 50s or older. But those at the vanguard of the future economy are overwhelmingly people from Generation Y - born in the 1970s or later. The first group must accelerate the ceding of decision-making power and control to the second, who at present often have little say in big corporate decisions. Our companies, even those long established, must increasingly be shaped by digital natives.
Finally, tracking and preparing for the future, as the CFE has done, will always be a useful exercise. But if the CFE were set up five years ago, its conclusions and recommentations would be totally different from what they are today. And if there is another CFE five years from now, it would also quite likely come up with very different ideas.
What we need then is to permanently track the moving target that is the future. Rather than continuing to have periodic CFEs, we should consider establishing a permanent, specialised institute that formalises the study of the future in a systematic way and shares its knowledge. We need something like this because the future will always be there and will increasingly seem to arrive sooner than we expect.
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