WANTED: the X-factor for Singapore Inc. Singapore firms need "something special" to step up to the international stage and to transform into companies like those from Switzerland and China, which manufacture quality products sold around the world, said Minister for Finance Heng Swee Keat.
Speaking at the Asean Conference on Thursday, he urged Singapore and Asean companies to regionalise and to tap the advantages of access to big markets and economies of scale.
The event was organised by the Singapore Business Federation, UOB, Rajah & Tann Singapore and RSM Singapore.
Mr Heng noted that as at 2014, about 99 per cent of non-financial companies in the European Union were from the European economic bloc.
On this side of the world, Singapore companies can grow with Asean, with the region expected to grow at 5.2 per cent on average from this year to 2022.
With Singapore's economy maturing, Singapore firms need to seek growth beyond their home market by building a niche, said the minister.
"I've always believed that you cannot internationalise without some real capabilities. Over time, you must expect that unless you bring something special to the table, you will not be welcome at the table."
Products from the developed markets usually emerge from companies with a better business model, or that are built with superior technology, he said. "If you look at the rapid growth in China, many of their products have now attained that level. So we must be humble about this, and we must learn."
He also said that while Singapore's growth rate is expected to be lower than in the decades before, that growth reflected in gross domestic product is not a limit for Singapore Inc firms that earn income beyond domestic confines.
"I look at the example of the Swiss economy. The Swiss economy's growth rate is also not high, but Swiss firms are all around the world, and they are selling world-class products. I hope that our businesses can play that role," he said.
Turning to the Singapore companies that are "quite behind" in boosting their productivity levels to match those of companies in the same industry in advanced countries, Mr Heng - citing retail and construction sectors as examples of industries in need of restructuring - observed that in advanced countries with high productivity posted by the construction sector, the worksites are extremely organised.
Cement is mixed and delivered like clockwork, for example, because cement dries up in the concrete mixer in about four hours. "Here in Singapore, if you look at some of the work sites, they are quite a mess," he added.
He also urged companies here to work on developing their workers and to collaborate with talent from all over the world, noting that countries such as the US and China continue to have a distinct advantage in having large talent pools.
On a related note, UOB chief executive officer Wee Ee Cheong said separately at the conference that while the question of machines replacing human beings remains the subject of debate, what is clear is the need to equip the workforce with new skill sets and mindsets for the new roles they can play.
The call for restructuring broadly comes as Singapore has to be conscious of how free trade can weed out the losers, and to ensure that people are not left behind amid the pursuit of free trade, said Mr Heng.
"Free trade will give us a bigger piece of cake, but some people may end up with nothing to eat, even though the cake is bigger.
"If you look at the reactions in many parts of the world, where people are against free trade, it is that the losers feel very aggrieved that the system has not served them well. This is something which all countries, including Singapore, must be very conscious of, and we have to ensure that our people benefit from free trade, because it (creates) a far bigger pie than if we were to close our economy."
Mr Heng recalled that when China became a member of the World Trade Organization, the country emphasised both reform and liberalisation.
"I think that encapsulates many of the things that we need to do. When we open up, we have to reform. Every country must want to improve its economy, and must want to create a better standard of living for their people."
Mr Heng said trade friction will ultimately be very disruptive to the global economy and "self-defeating" if it escalates into a trade war.
He said the more serious long-term issue is that trade wars undermine the "multilateral framework" which defines rules through which countries big and small can take part in the global economy.
"I hope good sense will prevail."
It was separately announced at the conference that the annual Asean Business Awards would include a new category to honour top multi-generational family businesses.
The awards are organised by the Asean Business and Advisory Council, and include recognition for promising young entrepreneurs and enterprises at various stages of growth. The awards this year will be presented in Singapore on Nov 12.