Shanghai will become a big financial centre, first serving the Chinese market, and later, an international financial centre. Mumbai and Dubai also aspire to be international financial hubs. India will grow its manufacturing sector in a big way and make its presence felt in the export market. All countries, including Singapore, will have to adapt to these realities. Domestically, we have other long-term headaches. We are facing a demographic crunch, with a rapidly-ageing population and a declining birth rate. Our people are increasingly mobile. In a borderless world, ensuring that our best remain rooted to Singapore, physically and emotionally, will be a challenge. Despite these challenges, I am optimistic about our prospects. I base my optimism on our fundamentals. We have two basic strengths – good governance and our ability to nurture and attract talent. Good governance and talent form a virtuous cycle for sustaining economic growth. Let me elaborate. First, good governance. A World Bank Institute report released in September 2006 ranked Singapore among the top 10% of countries around the world with good governance. Good governance is possible only if you have an honest, capable and committed government. In our case, the government must, in fact, be exceptional to overcome the exceptional challenges faced by Singapore, given our land and space constraints and geopolitics. For the next decade at least, I do not see any danger of a drop in the quality of our governance. The new team under Prime Minister Lee Hsien Loong is firmly in place.
But in typical Singapore fashion, we kept our cool to battle the crises and, at the same time, strategise to meet the larger challenges posed by globalisation. We formed the Economic Review Committee (ERC). The ERC came up with a comprehensive strategy to restructure, upgrade and transform our economy. The government accepted most of the ERC’s recommendations. We have since cut corporate and personal income taxes, reduced business costs, made wages more flexible, restructured the manufacturing sector, invested more in R & D (Research and Development) and revamped our education system. Our economy is now stronger and more broad-based than ever before. In 2006, our GDP was $ billion, 55% bigger than in 1998. Annual growth rate over the past 3 years averaged 8%, double the figure for the period between 1997 and 2002. This year, jobs are chasing after people. Two weeks ago, I attended the Gala Dinner for Merrill Lynch’s inaugural “Pan Asia Rising Stars Conference”. Several foreign bankers and business executives I met – some had not visited Singapore for many years and a few were here for the first time – told me that they were surprised and excited by the “buzz” in Singapore. It is not just the business buzz of the financial industry, the Integrated Resorts, the sizzling property market, and so on. It is also the glitz of our nightlife and our arts, culture and restaurant scene. How have we managed this quick and dramatic rebound?