Budget 2018 – Speech by Leon Perera

(Delivered in Parliament on 28 Feb 2018)

Singapore – the hub for ASEAN Disruption

Mr Speaker sir, we live in interesting times. Of course human beings in every era view their era as a time of modernity and change. But the era we are living through is seeing many fundamental economic and geo-political changes to the post World War II status quo, changes that are making the past a less reliable guide to the future, changes that underline ever more strongly that the strategies that brought us to today will not be the same ones that enable us to navigate successfully tomorrow.

The world is seeing the emergence of disruptive industries using new technology or new business models like the sharing economy, industries that may reshape the economy – destroying old jobs and stodgy companies but also creating new ones.

Geo-political and economic weight is shifting towards Asia, particularly China and to a lesser extent India, while Japan and Korea remain major economies and regional powers including ASEAN have the potential to emerge as one.

Meanwhile, inequality both within and between countries is adding to the unpredictability – triggering political shifts like what happened in the US with the election of President Trump and in the UK with Brexit.

And climate change marches on, even as the world struggles to cope, using the Paris accords that the US abandoned.

The continued importance of North America and Europe

The first point I would like to make in my speech is – while we pay special attention to Asia – and I agree we should do this – as our home region and the world’s fastest growing major region, let us not write off West.

In spite of the structural issues faced by some Western countries – which range from fiscal deficits and state debt to low productivity growth to inequality-fuelled populism and chronic crime in some cities – Western countries still have unmatched Soft Power. In fields such as R&D, entertainment, academia and ICT, not to mention military technology and diplomatic clout, the West still leads the world, even if the size of that lead is diminishing.

We should ensure that our efforts to engage North America and Europe are well-maintained, so as to draw learnings and forge partnership, whether in the public or private sector realms.

We should not assume that Asia will continue to outgrow the West in a linear fashion. Some Western countries have shown a tremendous resilience, an ability to rebound from set-backs. The recent victory of President Macron in France underlines that ability to self-correct and renew.

Disruptive industries

Next I would like to talk about industry disruption but specifically in the context of Asia and in particular ASEAN.

The world economy is teeming with disruption, which both destroys and creates anew. Some emerging technologies and business models that are disrupting the world include Big Data analytics, the Internet of Things or iOT (which collects Big Data), Artificial Intelligence (which is fed by Big Data), drones, autonomous vehicles, robotics including social robotics, 3D printing, Virtual and Augmented Reality, Cloud computing, crypto-currencies, genetic editing and renewable energy technologies like cutting edge solar cells coupled with cutting edge battery technology.

Many of these are coming together in interesting ways – for example iOT could generate vast quantities of data for AI to work on, so as to improve processes.

And this is not even mentioning sharing economy industries like private car-hire, whose disruptive effect is already quite mature in some cities.

As these technologies become increasingly mainstream, they will transform the economies of Asia. Indeed that is already happening, in both mature and emerging Asian economies.

How can Singapore be relevant to this process of the unfolding of disruption in Asia?

There are a number of ways –

  • as a hub for R&D and localization
  • as a test-bed to trial new products
  • as a management headquarters for regional companies
  • as a manufacturing base for high-tech, high-value added exports
  • as a service exports hub for things like analytics, professional and business services; and
  • as a financing centre.

Our economic agencies have for a long time conceived and implemented initiatives to help Singapore develop a role vis-à-vis the Asian region in these respects. These have helped to create and sustain many good-quality jobs and high value-added economic activities.

How could Singapore position itself to play such roles vis-à-vis the unfolding of disruptive industries in Asia?

Placing ASEAN first

For a start – and this is the second broad point in my speech – we could focus on ASEAN above all. I was glad to note some ASEAN-related initiatives in the Budget speech.

ASEAN has over 600 million people, about 8% of the world’s population. It is our region and our destiny is inextricably linked to its. It is also the region where our efforts to make Singapore’s economy relevant are pushing on an open door, given the vast size, presence of strong domestic industry players and market barriers that exist in China, India, Japan and Korea.

A Singapore that is deeply engaged and co-prospering with ASEAN will help ensure that ASEAN will be a fruitful intersection point between the great powers of China, India and Japan, rather than becoming their battle-ground at some point in the decades to come.

How can Singapore be relevant to the rise of disruptive industries in ASEAN? The example of Grab may hold a lesson.

Grab is a Singapore-based firm, with Singapore being its largest R&D centre. Grab has embarked on growth initiatives in the region. Along the way, it launched a new business model in Indonesia which is uniquely suited to that vast market – motorcycle-hire, which competes with local firm Go-Jek and others. Today Grab operates in over 50 cities across Indonesia. It also acquired Indonesian shopping app firm Kudo.

Singapore – a hub for disruptive industries in ASEAN

Singapore could be a hub for disruptive industry players as they plan and execute ASEAN-wide penetration strategies.

As such, Singapore could host data centres, management teams, R&D labs, financing hubs and so on. Singapore could also produce and supply to the region the most advanced, high value-added and IP-sensitive components, materials and services. Singapore, with its multi-ethnic make-up, could also be a test-bed to trial products.
For a start – and this brings me to my third broad point – Singapore could galvanise our base of autonomous universities, think tanks, private consultancies and research agencies and so on, to focus on mapping out the paths which disruption could take in ASEAN. At this point, I declare that I am the CEO of a research and consulting firm which operates in the Asia-Pacific and global emerging markets.

We could cultivate the soft power of working in a multi-disciplinary fashion to collect and analyse all relevant data on how disruptive industries could rise in ASEAN countries. ASEAN has 10 states of which only 2 have more than 15% of the total population. Each ASEAN state has a different economic, business, financial, technology, governmental and cultural landscape. Such studies could indicate the alternative pathways down which disruptive industries could evolve in ASEAN countries – leading to outcomes like Grab and Gojek’s motorcycle private-hire in Indonesia.

Dare to think Big

My fourth point is that Singapore could consider suggesting a bold, visionary project that aims to transform the ASEAN region itself into a test-bed for innovation.

The thing about big projects is that they can serve to galvanise a people and boost the economy.

President Kennedy’s goal of sending a man to the moon helped galvanise a massive scientific and organizational effort in the US. While the goal by itself served a symbolic, nationalistic purpose, along the way it helped seed an aerospace industry that has, over the decades, yielded many new technologies that US industry has made use of – like the business of launching commercial satellites today and the current US private sector space industry.

In Europe, 22 member countries have come together to create the European Space Agency or ESA for researching and exploring space, which has registered 82 successful commercial satellite launches till 2018. The Europeans also established the world’s largest particle accelerator in 2008, the 27 km long Large Hadron Collider, as well as other particle accelerators in a complex known as CERN. CERN focuses on high-end physics research. More recently CERN has become a pioneer in grid computing or distributed computing.

I am not suggesting we launch an ASEAN space effort or particle collider and I hope my speech will not be caricaturised as calling for that.

But the examples of NASA, ESA and CERN show us what ingredients can go into a bold project that has broad economic spin-off benefits.

We could propose a project that would enable Singapore to serve as a test-bed and hub as the project is rolled out across ASEAN.

I know that it is never easy or fast to get things off the ground in ASEAN. But such a proposal could build on the precedents set and the learning curve gained from pioneering the ASEAN Innovation Network, Financial Information Network and Agreement on E-commerce.

Possible ASEAN-wide initiatives Singapore could champion

Some ideas for such an ASEAN-wide that Singapore could champion are as follows.

1. Firstly, an ASEAN autonomous vehicles initiative, some or all of which could be electric vehicles. Singapore could help to test-bed autonomous vehicles, pioneering the establishment and maintenance of refuelling stations as well as the associated regulatory framework. The financing for such an ASEAN-wide project could be raised in Singapore.

The know-how and supply of parts and services for refuelling stations as well as manufacture of critical components for the vehicles could be undertaken in Singapore. One of Singapore’s core competences seems to be design, project management and servicing of urban infrastructure, a point I have alluded to in earlier speeches.

2. Secondly, we could propose an ASEAN urban solar panel initiative where Singapore test-beds new technologies for solar power generation in dense urban environments – I made a similar though not identical argument in this House in 2016. We could pioneer new technologies and processes in manufacturing, deployment and maintenance of solar panels. For example, though it need not take this form, such an initiative could use perovskite technology, which some scientists believe has major advantages over traditional silicon-based solar cells. Some hold that perovskite cells can generate more energy from sunlight on low-light days, which may be helpful given Southeast Asia’s weather patterns, though there are also disadvantages like a greater susceptibility to temperature and humidity-induced instability, which scientists are in the process of overcoming. The point is that Singapore could pioneer best-practices in the manufacture, deployment and maintenance of solar panels in dense urban environments in ASEAN’s largely tropical weather conditions. These could be used as a model for deployments in major cities across ASEAN.

I offer these suggestions in the spirit of demonstrating the contours that a major ASEAN-wide initiative could take, without asserting that these are necessarily the only or best candidates for such an initiative.


Lastly, and moving away from the main theme of my speech, I would like to pose two questions for the Finance Minister.

Firstly, why the need to lower the tax exemption for start-ups now, from 100% on the first $100,000 to 75%? Is there evidence that we have passed a certain threshold in terms of our effort to cultivate a vibrant start-up landscape? It would be helpful to understand the background.

Secondly, the Finance Minister did not mention the gig economy in his speech. Could he touch on how the government views the gig economy and what will be the broad thrust of government policy towards this sector.

Thank you.