Speech by Deputy Prime Minister and Minister for Finance Lawrence Wong at the Wharton Global Forum on 11 March 2023.
Professor Erika James, Dean of the Wharton School,
Mr Jon Huntsman,
Ladies and Gentlemen,
I am very happy to join you this morning for the Wharton Global Forum. Let me also extend a warm welcome to all our overseas guests. As we heard just now, and as I understand from the Dean, Wharton had intended to organise this Forum in Singapore back in early 2020. Unfortunately, we know what happened in early 2020, around the world things came to a standstill, plans were disrupted by the pandemic. And I also understand that, since then, you’ve not had the chance to meet; so I’m glad that you have chosen to come back to Singapore as the venue for your first ‘coming out party’ after COVID, your post-pandemic Forum here in Singapore; and of course we are very happy to have you back here.
It is not the first time that the Wharton Global Forum has been held here. You were last here way back in 2005. Then, like now, we also just emerged from a pandemic, it was SARS back then. So there are some similarities between then and now. But in fact, there are many differences too, because it feels like we are in a very different world.
In finance, they say “This Time is Different” – are the four most dangerous words, maybe the four most expensive words in the English language. Because anytime someone says “This Time is Different”, you better run away. It’s a sign of over exuberance in the market, overly-optimistic investors will say this to justify high valuations, and ignore tell-tale signs of a bubble. And then before too long the bubble bursts, you have a crash, and this happens over and over again because we are all human beings and susceptible to greed.
Unfortunately, the same four words can be used to describe the dangerous trends that’s shaping the world today. For different reasons. It’s not because of over exuberance in the market that suggest signs of an impending financial crisis. But because of major changes in our global environment.
In fact, if you look at the long arch of history, geopolitical contest and conflict has always occurred. In many ways the last 30 years where we enjoyed peace, stability, mutual inter-dependence was an anomaly. And all that, it seems, is coming to an end and history is back with a vengeance because great power rivalry is gathering force, most notably between America and China. The war in Ukraine does not directly involve either of the two super-powers. But it has added to the tensions between them. And, meanwhile, over in this part of the world, Taiwan has become the most dangerous flashpoint.
This geo-political contest will play out through hard power as well as economic and technological domains.
On the economic side, the era of untrammelled globalisation that we enjoyed over the last 30 years is over. Businesses are now re-organising themselves to account for once-unimaginable tail risks, including and especially, geopolitical risks. More and more multi-national companies are looking to re-shore, on-shore, or near-shore and these are just codewords but it merely means relocating production back to their home countries, to places nearby or close to large nodes of consumption, where they are also less likely to get caught up in geo-strategic crossfires.
Governments are embracing more muscular industrial policies. The US, China and EU for example, are stumping out more aggressive support, in the form of tax breaks and subsidies, to develop domestic strengths in what they assess to be critical industries like semi-conductors and green energy. And so we are seeing the start of an industrial policy arms race, and a huge contest for leadership in key technologies, which is likely to escalate with time.
People say history doesn’t repeat itself, which is true, but it often rhymes. And if history is to be any guide, we must expect the coming decades to be defined by this evolving US-China relationship. Of course, we hope that events will not follow the script of the first Cold War. During that period, the world experienced a nuclear arms race, a terrifying mix of brinkmanship and near catastrophic misses, as well as bloody proxy wars that killed millions of people. We don’t want to go down that same path again. And there are some ways that things are different. China is not the USSR – it is much bigger and is more integrated into the global economy. Supply chains today are much more widely distributed around the world than they were 30 years ago. So for now, it is very hard to imagine a complete reversal of globalisation. But globalisation will clearly be reshaped by this strategic competition between the big powers. The patterns of trade will change. Supply chains will be reconfigured, because security considerations are now moving to the forefront of commercial decisions. And left unchecked, if this trend continues, we will see a more fragmented and dangerous global order.
It is good that the leaders of both the US and China have met recently and affirmed their intent to engage one another. Both countries say they do not want a new Cold War, and that they want to establish guard-rails to ensure competition does not escalate into full-blown conflict. But there remains much to be done. Because while both sides wish to avoid conflict, neither side can afford to be seen as weak. And at the root of this rivalry, lies a lack of strategic trust between the two countries. This is rooted in incompatible worldviews, and aggravated by their respective domestic political pressures.
One narrative you sometimes hear is that the US and the West is in decline; and China and the East is rising. This is sometimes what you hear. Indeed, there is no doubt that the centre of gravity of the global economy is shifting towards Asia – whether you measure growth rates, or you look at size of Asia in the coming years, the statistics will bear this out. But we should not over-state the case. After all, people have been predicting the decline of the US for decades, and the US still is one of the most advanced and vibrant economies of the world. Just look at biotech and Artificial Intelligence, for example, two cutting edge industries which will revolutionise the modern economy and our way of life. America remains at the forefront of both of them. In biotech, it was the mastery of mRNA technology that has brought about the Covid vaccines that enabled us to get through this pandemic safely. In the field of AI, the US advancements in generative AI has taken the world by storm, upending our notions of what AI is capable of.
And part of the reason for all this is America’s openness to new ideas and its attractiveness to talent from around the world. And this is supported by world-class research centres and universities – like Wharton and the University of Pennsylvania. In fact, it was at the University of Pennsylvania where Katalin Kariko first discovered how to safely use mRNA technology, together with her collaborator Drew Weissman. Katalin was born in Hungary and was a researcher there before she moved to America in her 20s. Her story is not unique at all. Many inventions can be traced back to innovative and industrious immigrants to the US. Indeed, a recent study found that over one third of all American innovation since 1990 can be attributed to immigrants.
And this is America’s strongest advantage: your ability to draw the best students, researchers and professors from around the world, and create in the US, an environment of open inquiry and experimentation, conducive to, and indeed essential for, cutting-edge research and major breakthroughs to happen. In the best American universities, which include the University of Pennsylvania, of course, as well as my Alma Mater, I should add - I went to three US universities, Wisconsin-Madison, Michigan and Harvard - so let’s not forget them. In the best American universities, you have the intellectual ferment and exchange required to challenge great minds and to do great things. Many other countries have tried, but few have been able to replicate what America has done. This has enabled the US to remain a highly innovative society, one with an enormous capacity to reinvigorate and reinvent itself. And so long as you uphold these fundamentals, I have no doubt that America will continue to maintain pole position in new technologies and will continue to play a key role in these new emerging areas.
Of course, at the same time, the countries in Asia will not stand still – there is tremendous energy and determination in this part of the world for countries to move ahead in terms of knowledge, scientific excellence and innovation, and really just to improve the lives of our people here. Around the region, we have a fast-emerging plurality of economic centres. There is, of course, China, which, because of its size, its massive scale and depth of talent, will continue to grow and develop. It will likely establish dominance in several primary and manufacturing industries, including in emerging areas like batteries and Electric Vehicles. Japan and Korea remain important economies with deep technological strengths. Meanwhile, India is rapidly emerging as an economic powerhouse because it is seeing the fruits of its digitalisation and reform efforts and is set to become the world’s third-largest economy by the end of this decade.
Southeast Asia too is becoming a growth centre in its own right. Here in ASEAN, the economies are coming together, driven by a large and rising middle class. There is tremendous economic potential here too, with a combined population of 660 million, larger than the EU, and a combined GDP of US$3 trillion. Not so high for now, but we expect this to double, if not quadruple over the next two decades.
Crucially, there is great diversity amongst Asian countries. These are old societies with deep cultures and long histories. Each one will forge its own destinies. They will resist pressure from outside, and will want to make their own choices in domestic and international affairs.
And so, in this emerging multipolar world, we must develop frameworks that will enable countries to do business with each other, even if they do not always see eye to eye on all issues. And if we can forge stronger partnerships between the major powers and all countries in the region, we can help foster a more stable and prosperous Asia and indeed a more stable and prosperous world. That is why Singapore supported the Regional Comprehensive Economic Partnership (RCEP), which is the world’s largest Free Trade Agreement, covering countries such as China, Japan, Australia, and the 10 Southeast Asian countries.
Meanwhile, America has signalled its commitment to deepen its economic engagement of the region through the Indo-Pacific Economic Framework (IPEF). Singapore has welcomed this too and we hope to work with partners to develop a framework which is open, inclusive, and flexible, which will benefit all its participants.
Concurrently, we must all work together to fortify multilateralism, and the global rules of the game. Over the past half a century, the open, rules-based international order has helped keep the world relatively stable. It was never perfect; there was never agreement on all global issues. But this stability fostered international cooperation and gave birth to an era of unparalleled economic transformation which we have enjoyed – many countries prospered, and millions were lifted out of poverty. Today the world is more divided than ever before. But amidst these differences, we must find enough common ground to solve our collective problems. So we need new working arrangements amongst countries to facilitate global stability and international collaboration on pressing issues like climate change, and pandemic preparedness. We also need to strengthen multilateral institutions, like the IMF, World Bank, WTO and WHO. These have helped to define the rules-based international order over the decades, and we must ensure they remain strong and relevant, so that all countries have a stake in the international system and will do our part to ensure peace and stability in the world.
Singapore, of course, will do everything we can to advance these goals. But we are very realistic about what we can or cannot do. After all, we are really one of the smallest countries in Asia, we know that we have to adapt to the world as it is, not want we would like it to be. Singapore today may be in a stronger position than when we started out as an independent country in 1965. But we will always be that little red dot in the world – an improbable nation that was really never meant to be. And in this era of change, really one can never take things for granted.
In fact, I was reminded of this when I was a student at Michigan. In Michigan - some of you may know or this may be new to you - there used to be a town and it was called, of all things, Singapore. It was founded in the 1830s, by the mouth of the Kalamazoo River near Lake Michigan. Its founders reportedly called it Singapore to attract boat traffic from Lake Michigan – presumably because they had heard of a thriving exotic port with the same name in Asia, because the British had discovered Singapore not too long ago, in 1819. And because it had access to plentiful white pine trees, for about 50 years it thrived as a lumber and shipbuilding hub. But the lumber trade eventually waned, and the mills moved elsewhere. And the town was eventually swallowed by Lake Michigan’s shifting sand dunes. So today if you go there, there is a signboard and that is the only physical marker that remains as a marker of the existence of the town of Singapore in Michigan.
The story of Singapore in Michigan has largely been forgotten – lost, quite literally, to the sands of time. But it is a familiar one to the many other cities whose fortunes have waxed and waned throughout history.
We are determined not to let such a fate befall us – Singapore in Michigan did not last very long. But we want Singapore in Southeast Asia to be around for a long time, to be around not just to survive, not just to exist but to thrive and prosper. So in this dangerous and uncertain world, we will continue to do our best to stay relevant and to add value as a key node in this changing global network – a hub for talent, finance, trade, and ideas. And we will continue to build a vast network of friends, to promote peace and stability in our region, and most of all to preserve our sovereignty and right to determine our own future.
It is for this reason that we are especially glad to host events like the Wharton Global Forum. In fact, I understand, I may have gotten this wrong but I was told that the idea for the forum started here in Singapore, back in 1992. It emerged from a conversation between 3 of Wharton’s Asia Executive Board members, which was meeting in Singapore at the time, and they were talking about how to strengthen Wharton’s presence internationally. Arising from that conversation, the first forum was held in Manila the next year. Since then, the Forum has brought Wharton’s global alumni and international business together to foster connections, facilitate exchanges of ideas, and to nurture opportunities amongst yourselves.
30 years later, we are delighted to have the chance to host this Forum again, back here. It reflects the role that Singapore can play in this changing world – as a convenor, as a connector, as a facilitator; and ultimately, as a place where we can imagine new possibilities, where we can make things happen, and where the human spirit will always thrive. I hope that in the last few days here in Singapore you have found all this possible. And I am confident that if we all do our part to bring businesses and other stakeholders closer together, we can maximise our chances for continued stability, peace, and prosperity in Asia and the world. On that note, I wish all of you a fruitful time here in Singapore, and a great conference ahead. Thank you very much.
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