DPM Heng Swee Keat at the Singapore Summit 2019

DPM Heng Swee Keat | 20 September 2019

Speech by DPM and Minister for Finance Heng Swee Keat at the Singapore Summit on 20 September 2019.


Mr Goh Chok Tong,
Patron, Singapore Summit

Mr Ho Kwon Ping,
Conference Chairman, Singapore Summit

Your Excellencies

Distinguished guests

Good evening. Welcome to the Singapore Summit. To all our overseas guests, I hope you will have an enjoyable stay in Singapore. I am very glad to be here today to exchange views on global and regional developments.

The theme for this year’s Summit – “Asia 2030” – is most timely. Asia’s economic weight and influence have grown significantly. Its share of global GDP is projected to increase from just 26% in 2000, to 40% by 20301. In particular, the 10 economies of Southeast Asia as a group is projected to become the fourth largest economy by 2030, after the US, China and Europe2. Asia is growing into a vibrant and dynamic region. By 2030, two-thirds of the world’s middle class will be living in Asia, making it home to the largest group of consumers3. Meanwhile, innovations created by Asian companies are reshaping the economic and technological landscape.

The promise of Asia is bright, but not inevitable. It is hard for us to make confident projections into 2030, even though it is just 11 years away. 11 years ago – in 2008, we were grappling with the Global Financial Crisis (GFC). Several global banks crumbled. Many people lost their jobs, some even lost their homes. The global economy nose-dived. Back then, I was heading Singapore’s central bank – the Monetary Authority of Singapore, and I had a good vantage of our port from my office. It was at an eerie standstill – the cranes were idle.

Today, while the global economy has recovered, the benefits of the recovery have been unevenly distributed. Those who feel marginalised have pushed back strongly. As a result, we are seeing a retreat from globalisation, the growth of nationalist and populist movements, and the disenchantment of young people. These forces have played out across the world, in the 2016 US Presidential Elections; The UK Brexit referendum; The Yellow Vests movement in France; and the ongoing protests in Hong Kong.

The fracturing of societal interests has made it difficult for many Governments to secure a mandate to make important changes. As such, politics is increasingly marked by snap polls, hung parliaments and government shutdowns. Which in turn engender further distrust towards governments and the political system.

All these point to a fraying of the social compact that holds societies together. Not only has the relationship between governments and their people changed, the relationship between companies and societies has also altered.

This is especially worrying because the global economy is once again at a crossroad. Trade tensions between the US and China continue. The US economy, which was buoyed by a series of tax cuts and concessions, could wane next year4. China is also facing slowing growth, at a time when total debt has grown to more than 300% of GDP5. In Europe, the economy is weak, the effects of slowing global trade are being felt, and the Brexit conundrum is adding to uncertainty.

Nearer home, the rest of Asia is experiencing slower growth, as global demand and investor sentiments have weakened. Unless some of the fundamental tensions across society are resolved, we will all find it difficult to weather these challenges. It is therefore important for each society to renew its social compact. We need to address: first, widening inequality, resulting from globalisation and technological advancements; second, growing intergenerational divide, particularly as societies age; third, deepening political polarisation, made worse by social media.

Singapore has so far been spared the full force of these challenges, but we are not immune to them. In response, we are renewing our social compact. We do not have all the answers to these complex issues, but by sharing Singapore’s experience, I hope to catalyse a discussion on how we can address these common challenges together.

Widening inequality

Let me start with widening inequality. Between 1980 and 2016, the top 1% of global earners captured 27% of total income growth, more than twice the share captured by the bottom 50%6. Globalisation and technology have played a big part in this. Globalisation has created huge opportunities for the talent and capital of those at the top, resulting in massive wealth accumulation, but it has also exposed those in the broad middle to sharper competition. Technology has enabled innovation and growth, but it has also disrupted and, in some cases, displaced people’s livelihoods. Globalisation and technology have their benefits, but also costs. If the costs are unaddressed, inequality will worsen and this challenges the basic premise that underpins every society – the opportunity for every individual, to build and have a better life.

In Singapore, our response has been to ensure that our economic and social policies go hand in hand, so that our people can work for reward, and be rewarded for work. To enable all to do better, we need a growing economy that creates good jobs for the broad majority. This means staying open to the opportunities from trade and innovation, but these are also the very forces that widen inequality. To resolve this paradox, economic development needs to be paired with social strategies to invest in our people, and to enable them to access opportunities.

So far, this approach of striking a balance between embracing market mechanism and maintaining social welfare has worked for us. We have enjoyed broad-based economic growth. Real incomes for households across all income bands in Singapore have grown over the past decade7, and those in the bottom 20 percent experienced faster income growth than those at the top 20 percent8.

We must stay committed to investing in our people. Education is a basic starting point. Over the decades, we have invested heavily in education, to make every school a good school, and to bring out the best in every child, regardless of their starting point. We have created multiple education pathways, so that every child can find his or her own path to success. We invest in ten years of basic education, followed by several more years of tertiary or post-secondary education.

More recently, we are extending our investment at the two ends. On one end, we have invested significantly in preschool education. These formative years are key to a child’s development. Our additional investment seeks to give every child a good start, and helps to mitigate inequalities early on in life. At the other end, we are making a significant effort to encourage lifelong learning. Jobs and skills will continue to change, faster than ever. So we are building up an ecosystem where workers can pick up new skills, at every stage of life. By acting both upstream and downstream, we enable our people to benefit from new opportunities. But we also recognise that the market alone will not adequately provide for everyone in society, so governments have to strengthen social safety nets and set the baseline.

In Singapore, we do this by raising the bottom, not by capping the top. We focus on three key areas of our social policy: housing, healthcare and education. For housing in particular, our national home ownership rate is 89%9. Lower-income households are also encouraged to own their homes. For instance, with housing grants, 85%10 of households, whose income are in the bottom 20 percent, own their homes. This gives every Singaporean a stake in the country, and a share in Singapore’s progress. We also temper raw market outcomes from employment. We top up the incomes of the bottom 30% of workers. This preserves the incentive to work, which is critical – because a job provides not only income, but also dignity and the hope for progress. We sustain this in retirement – through additional support for those with limited retirement savings. We have gone one step further for older cohorts of Singaporeans. They started life in the early years of independence, when the economy had not taken off, and did not benefit as much from Singapore’s progress. So we introduced special packages – the Pioneer Generation Package and the Merdeka Generation Package, to help them meet their healthcare costs for life.

These various elements of our social policies are a deliberate strategy to even out unequal outcomes throughout life. We will make sure that no one is excluded from opportunities, because of their backgrounds or circumstances.   As economic disruption becomes more frequent, people who suffer setbacks will require concerted efforts to get them back on track. This is not easy, but if we do this right, we will be able to deliver broad-based progress for our people.

Inter-generational divide

The second challenge is the growing inter-generational divide in some societies, especially those which are ageing. There are real differences in the interests and concerns of different generations. The Brexit referendum is one example. Opinions on Brexit were sharply divided by age groups11. Many older voters chose to leave the EU, driven by promises of social spending. Younger voters mostly wanted to remain, driven by the prospects of a better future. They are aggrieved that their future has been decided by those who may not live through the consequences of their choices12.

Pension plans are another classic example. Today, many of the defined benefit pension plans are underfunded, as politicians have promised higher benefits over the years without raising contributions. A Citibank report shows that the total value of unfunded or underfunded government pension liabilities in OECD countries comes up to a staggering US 78 trillion dollars13. Societies now face the hard choice of either cutting pension payouts, or increasing the tax burden on the working population.

Providing for inter-generational equity is critical to the social compact. When each generation pays for its own spending, it internalises the costs and benefits of the spending. Yet we must also invest in our young, and our young must in turn share the fruits of progress with our seniors.

We are fortunate that our founding leaders took this principled and far-sighted approach. We operate a fully-funded defined contribution scheme – the Central Provident Fund – avoiding the pitfalls of defined benefit pension plans. Our healthcare system delivers good outcomes while keeping cost in check.

On top of this, Singapore has built up substantial reserves. In our early decades of economic development, we enjoyed strong annual growth of about 9%14. Revenue growth was strong, and the government was careful in saving part of the revenue collected as reserves for a rainy day. As such, we have grown our national reserves over the years. Under our Constitution, the government of the day can use up to 50% of the net returns from the investment of our reserves. Today, this income from our reserves is our largest source of revenue, more than any single category of taxes. For a country with no natural resources, we are grateful for the prudence of our founding leaders and earlier generations of Singaporeans.

Taking a fair and sustainable fiscal approach reflects the social compact between generations, upheld by both the Government and our people. This compact is not just a matter of finances, but of trust and a collective sense of mission. For the government, it means always thinking ahead about our country’s long-term future. This is why we invest in our people through education and it is also why we invest in infrastructure. We constantly rejuvenate our city, so that it remains vibrant and dynamic. Jewel, at Changi Airport – which some of you have seen – is our latest infrastructure addition.

Climate change is yet another example. The full effects of climate change and rising sea levels, and the benefits of our mitigation measures, will only be felt beyond most of our lifetimes. But we have to act now, before it is too late, or our future generations will bear the consequences of our inaction. For our people, this means an equal commitment to ensuring that future generations have enough to also see through crises and plan for their future. So we try our best to keep politics focused on long-term challenges and opportunities.

Increasing Political Polarisation

I have spoken on two major challenges – addressing widening inequality, and maintaining the social compact across generations.

The third major challenge is the increasing political polarisation seen in many parts of the world. We see this in the US, where Republicans and Democrats have become increasingly divided along ideological lines. Similarly, in parts of continental Europe, political polarisation has squeezed out the middle ground. Technology has exacerbated these divisions, by enabling echo chambers, silos and fake news. Political polarisation is damaging because it pits people against one another and ultimately undermines the cohesion of a country. To arrest this trend, we need to broaden the common space, and bring those with opposing views together.

In Singapore, we have safeguarded our social cohesion by resisting the political pressures to pander to narrow interests. Rather, we are taking an inclusive approach to bring together all Singaporeans. For instance, we have put in place measures to ensure that race and religion do not divide us. We ensure that there is a good racial mix in our housing estates to avoid segregation. We enacted laws to maintain our racial and religious harmony, and to safeguard the rights of minorities.

Our tripartite system is another way to deepen cohesion. Rather than confront each other across the picket line, Government, unions and businesses work together to grow the economy and share the fruits of progress. This has enabled us to overcome crises time and again. When the 1985 recession hit, the Government proposed a two-year wage restraint and cuts to pension contribution rates. This was not an easy decision. But union leaders understood why we had to do this, and they convinced their members to agree. And in turn, businesses played their part to save jobs. Together, we turned the economy around. Our tripartite model has continued to pull us through difficult times, including the GFC.

Our inclusive approach has built a system that rewards and encourages engagement with the middle ground. This has underpinned our unity and stability, but it will be challenging to maintain this course. In the digitally driven economy, increasing returns to scale and scope can sharpen income and wealth disparity. Our society is becoming more diverse, both in terms of needs and views. Old differences will evolve and new divides can emerge – between the rich and poor, the young and old, and along ideological lines.

This is why I launched the Singapore Together movement several months ago: to emphasise a governance model that brings people of different backgrounds, concerns and perspectives together to make common cause; to expand the common space for discussion and debate. But more importantly, we want to go from talking, to walking the talk. For young people especially, being able to actively shape the future of our nation and playing a part to build this future, is key to growing their sense of ownership and commitment towards Singapore.

These sentiments are consistent with those of young people all around the world, many of whom are demanding a larger role in civic society and the political process. Societies will need to find ways to harness the energies and ideas of their youths, for they are our future. We must provide opportunities for our youths to work with young people around the world. This will help build better understanding, and deepen commitment for global cooperation.


All three challenges that I have highlighted – widening inequality, intergenerational divide, and political polarisation – undermine social cohesion in different ways. The effects of each will be aggravated by globalisation, technological advancement, and ageing societies. To address them effectively, each society must renew its social compact – find a formula that best fits its unique circumstances, its own blend of social and economic policies, to give everyone a stake and its own political narrative, to reignite the imagination of its people.

I have shared Singapore’s experience. Many other countries have also embarked on similar journeys, such as France’s “Great National Debate” and Japan’s “Society 5.0”.  We can all learn from each other.

Beyond strengthening the social compact in our own country, countries also need to work together, to tackle common global challenges, such as climate change, poverty, food security and cybersecurity. We must not forsake multilateralism simply because the current ground sentiments are shifting away from it. Instead, it is our role as leaders to uphold this system collectively, and convince others that this remains the best way forward.

This brings me to my final point.

More than ever before, business leaders must play a greater role –  to renew the social order of the countries they operate in, and revitalise the international system. Some business leaders have been championing conscious capitalism - the idea that businesses should serve not only their shareholders, but all principal stakeholders – including customers, employees, suppliers and the environment. Many other businesses have already stepped up to take on greater social responsibility, by launching initiatives to support sustainable development goals  in areas such as gender equality, environmental sustainability and promoting education and healthcare. These are positive developments. Over the decades, the economic and political influence of big businesses have grown significantly both domestically and globally, and businesses can do even more to make a difference, by working together, and with governments, to create innovative solutions to improve the lives of everyone.

Fundamentally, doing well and doing good need not be contradictory. Finding a way to achieve both will help us unlock the tremendous opportunities of Asia 2030, and to make progress towards the Sustainable Development Goals.

On this note, I wish you all a productive conference ahead, and I look forward to hearing your views on how we can build a more dynamic and promising future for generations to come.

Thank you.

[1] “Asia 2050: Realising the Asian Century”, Asian Development Bank (2011) 
[2] “Global Insight”, IHS (2016) 
[3] “The Unprecedented Expansion of the Global Middle Class – An Update”, Brookings Institute, Homi Kharas (2017)
[4] World Economic Outlook, July 2019, IMF
[5] “China Views: Is External Debt a Devaluation Constraint?”, Institute of International Finance (2019)
[6] “World Inequality Report”, World Inequality Lab (2018)
[7] Department of Statistics, Singapore
[8] Department of Statistics, Singapore
[9] Report on Household Expenditure Survey 2017/2018 
[10] Report on Household Expenditure Survey 2017/2018
[11] “Brexit: How much of a generation gap is there?”, BBC (2016)
[12] “Brexit: How much of a generation gap is there?”, BBC (2016)
[13] “The Coming Pensions Crisis”, Citi Global Perspectives & Solutions (2016)
[14] Average growth from 1965-1995, Department of Statistics, Singapore