Exporting knowledge: Can S'pore compete?

Exporting knowledge: Can S'pore compete?

The following is excerpted from a speech by NGIAM TONG DOW at CPFB's Learning Forum yesterday. He was chairman of the CPF Board from 1998 to 2001.
I am therefore in full support of A*Star's thrust to train 1,000 PhDs in science and engineering over the next decade. They will indeed be our cutting edge in the tough and demanding world of knowledge-based competition.
- Ngiam Tong Dow

THE CPF, established in 1955, was structured on the assumption of life-long employment. It was a self-funding contributory scheme for retirement, with equal contributions from the employer and the employee.

Each CPF member has his own unique account number, which is portable. Unlike traditional pension schemes, savings remain with the member whoever his employer is.

The CPF has over 1.5 million active members, which makes it the largest savings bank in Singapore.

From its earliest beginnings, it has invested in computerisation.

If my memory serves me well, the CPF was the second government institution to purchase a mainframe computer after the Ministry of Finance. The CPF could have cruised along on auto-pilot if the laws of classical economics had not changed.

When I was at university in the mid-1950s, we were taught that the three factors of production were land, labour and capital. Countries richly endowed with land, labour and capital are likely to be wealthier than countries less endowed, such as Singapore.

So, how has Singapore, a tiny rock outcrop at the southernmost tip of Asia, triumphed over adversity to become today's global city? When I visited the Japanese Ministry of International Trade and Industry (MITI) in the mid-1970s to make out the case for Singapore to host the Sumitomo petrochemical complex, I met with MITI's director of industrial policy.

When I asked him what Japan's industrial policy was, he gave me an enigmatic reply. He said simply that knowledge is power, if applied with insight. But what is knowledge? Knowledge may simply be timely information.

In the early 1960s, the rice and rubber merchants of Carpenter and Hongkong Streets gathered each morning at Lau Pa Sat, the old Ellenborough market, to 'yam cha'. Over their cups of fragrant tea, amid the banter and the gossip, someone may talk about the low rainfall in peninsular Malaya or Sumatra, where their rubber estates were.

Latex yield is lower if the weather is drier. These rubber traders would then sell rubber futures long or short depending on what they expect the weather to be. This was the supply side of the equation. Our rubber merchants made a killing on the demand side during the Korean War boom when demand for all raw materials shot up.

Operating data

Knowledge may also be mined from operating data, which are normally filed away.

As PS (Budget) in the mid-1980s, I was invited by the Environment Ministry to visit the latest incinerator plant built at Tuas. Each plant costs around $500 million and was designed by a German consulting company. The consultant who was showing me around thanked my ministry profusely for what I thought was his handsome consulting fee.

Instead, he thanked me for the operating data he was collecting from our new plant. Unlike incinerator plants in temperate countries, which burnt dry garbage, Tuas had to burn wet waste, in a hot and humid Singapore.

Our data enable the German engineers to be more precise in determining the operating parameters when they design similar incinerator plants in Kuala Lumpur or Jakarta, cities at or near the equator. Market research is not just a random walk in the park sampling opinion of passers-by.

It aims at finding out in depth and detail what a customer really wants in a product or service. In the early 1970s, Toyota and Nissan sent research teams of engineers and industrial designers to Hamburg in Germany to find out what the German motorist requires of the new car he is buying.

The Japanese automakers figured out that if they can satisfy the technically demanding German customer, they would be able to meet the expectations of motorists in other countries as well. After spending three years researching the needs of the German motorist, the teams returned home and designed a technically efficient car to a price set by the president of the company. However technically sound the vehicle is, it has to sell in the volumes to break even and turn a profit.

Market research

Another example of the crucial role of market research is the Boeing aircraft company. When I visited Boeing in Seattle as an SIA director in the early 1970s, its president told me that Boeing is a marketing more than a manufacturing company. When I expressed surprise, he said that his company's research teams assiduously pored over the figures of traffic growth between cities and continents.

The most crucial decision in building a new aircraft is determining its optimum size for the particular sector it is designed to serve. Hence, the legendary 707 series spun off into 737, 747, and now the 777, to serve different market sectors.

Market research is soft knowledge, and companies who are not meticulous enough will rue the day. The Concorde was a technological marvel, but a commercial flop.

As a Singapore administrator, I am more a generalist than a specialist. All of us in the Singapore Civil Service are familiar with the concept of having a helicopter view.

According to the Shell doctrine, a leader in business must fly high enough (in a helicopter) to have an eagle's sweep of the terrain. At the same time, like an eagle he must have the agility to swoop to the ground to pounce on the hapless field mouse for dinner.

Since my retirement as a generalist administrator in the Singapore Civil Service, my hobby is studying business models of enterprises. In assessing a business to invest in or to lend to, I always try to fathom or figure out the most critical piece of knowledge for success.

As chairman of DBS Bank (1990-1998), I was asked to approve a fairly substantial loan to an Indonesian Chinese businessman to build cold storage facilities for his vast prawn farm in Indonesia. The farm was the size of Singapore and it would require me to fly in a helicopter to see it. When asked, he told me that the most important ingredient for success in large-scale prawn farming was the fertility of the mother prawns.

The more fry the mother prawn produces in a season, the greater the output of prawns from the farm.

He did not have the scientific knowledge to increase the fertility of mother prawns. So he hired a top zoologist from Hawaii who devised a technique to stimulate mother prawns to produce more fry.

In the current, sometimes heated, debates on what our R&D directions should be, perhaps we should invite more business entrepreneurs to sit on the research policy panels.

They would be able to point Singapore in directions which would accelerate Singapore's economic transformation. The founding entrepreneurs of Singapore were men who migrated here with barely a shirt on their backs. Fleeing poverty and turmoil, they came from homelands such as Arabia, Iraq and Oman in the Middle East, India and China, and Indonesia which was a country of adoption for some of them.

Most of them had only elementary school education. A few were unschooled.

In a relatively benign and open British colonial administration, they competed fiercely. A few succeeded beyond their wildest dreams. Though without much formal schooling, they became great benefactors of education, endowing schools, polytechnics and universities.

Their foresight and vision laid the foundation for the current generation of Singaporeans to compete in a global knowledge-based world.

Sociologists speak of a digital divide. I prefer the more embracing concept of a knowledge divide. How do we ensure that we fall on the right side of the divide?

Technological competence

Dr Pannenberg, then the R&D director of Philips of Holland, was Singapore's first technology adviser. Without a large population base and depth of talent, he advised us to raise our technological competence first before we embark on cutting edge research on the frontiers of science.

He told us to expand our science and engineering faculties in the universities. NTU was established as a result. Dr Pannenberg's view was that if we have the trained manpower, multinationals would naturally gravitate to Singapore to establish production facilities for fine chemicals, pharmaceuticals, advanced electronics chips, and complex engineering components.

I am therefore in full support of A*Star's thrust to train 1,000 PhDs in science and engineering over the next decade. They will indeed be our cutting edge in the tough and demanding world of knowledge-based competition.

Olivia Lum's Hyflux, a pioneer and leader in membrane water technology, is a forerunner of Singapore's very own knowledge-based industries. Olivia is a BSc in chemistry from NUS.

With more scientific competence, there will be many more Singaporean knowledge-based enterprises in the next decade. The pressing question however is how do we compete in a knowledge-based world? The stakes in the knowledge race are high.

Singapore has chosen to compete in the life sciences domain of stem cell research unravelling the human genome. The world's leading pharmaceutical companies are pouring billions of dollars worth of research effort for therapies that will cure hitherto incurable diseases. At its most fundamental, it is man's search for longevity, if not immortality.

Longevity is in the realm of knowledge. God forbade Adam and Eve to peer into the book of life, which is immortality. However bitter, He allowed them to eat of the fruits of the tree of knowledge. As an individual citizen, I will not prejudge the outcome of research in the life sciences.

Singapore may yet be the first nation to discover some of the secrets of life. I do not know enough to second guess our scientists.

There are however many other knowledge domains where Singapore can compete in. I will start with my own company, Surbana Corporation. Surbana grew out of the Building Department of the Housing Development Board (HDB).

Our urban planners, architects, engineers and project managers have honed their skills, planning and building 28 new towns in Singapore over the last 45 years. This pool of knowledge is invaluable in our search for business overseas. We believe in and project ourselves as a knowledge-based company.

To date we have been engaged to plan, design and build three townships in China: in Chengdu (8,000 residential units of middle-class housing), Wuxi (6,000 units) and Xi'an (30,000 units). The Xi'an project is on the same scale as Toa Payoh.

Surbana has gone beyond just housing. Our clients in Dubai, Abu Dhabi, Bahrain and Oman have asked us to advise them on what they call strategic city planning.

It embraces all the facilities and amenities needed by a modern city, such as power stations, water reservoirs, mass rapid transportation system, schools, hospitals, shopping malls and recreational attractions.

Being wealthy oil countries, they will invest up front in infrastructure. They welcome Singapore companies to manage and operate the hotels, the schools, the hospitals, and the transport systems. The UAE and neighbouring countries are in the midst of a paradigm shift from total dependence on oil to more sustainable growth strategies.

Singapore as a successful city-state has a golden opportunity to participate in this transformation of Middle East countries. Over the last 50 years of rapid economic development, Singapore has acquired expertise and experience in knowledge domains which will stand us in good stead for competition in a global knowledge-based world. PSA, CAAS, and Jurong Town Corporation (JTC) have used their knowledge base in seaport and airport development, and industrial parks, to win business in new overseas markets.

If you were to ask me to identify the knowledge domain that Singapore is most competitive in, without undue modesty, I would say it is public administration. While the sine qua non of good government is incorruptibility and integrity, it is good administration that will deliver the public goods and services.

Prime example

Without claiming that the Singapore Civil Service is perfect (no administration is), over the years we have accumulated knowledge and experience, quoting a tag line of Singapore Airlines, that even other countries talk about.

Indeed, SIA itself is a prime example of a knowledge enterprise. I was a member of SIA's founding board in 1972, and saw it grow from a fledging regional airline to be among the top 10 airlines of the world today. And we did it all by ourselves, building up our skills and expertise in marketing, air services negotiations, engineering, cabin crew, aircraft financing and, most important of all, developing the personal knowledge of each individual man and woman.

The chairman, board, CEOs, and senior management were all Singaporeans. SIA is truly Singapore's first knowledge-based company. SIA however is not the only Singapore knowledge-based company.

HDB, PSA, CAAS and JTC have become knowledge exporters winning management contracts in overseas markets against stiff competition. CPF can also be a knowledge exporter. Countries like China, India and Vietnam will find your experience invaluable as they go about establishing their own social security schemes.

When I was your chairman, I offered your backroom processing capability in administering 1.5 million members' accounts to the then Big Four Singapore banks.

With scale, costs of processing statements of accounts and other documents can be reduced.

Lower production cost will be a competitive advantage to our banks battling against the Citibank or HSBC of the world. Bill Gates of Microsoft made a similar proposal to the world's 150 leading commercial banks at the annual meeting of the International Banking Conference in Seattle in the mid-1990s.

I attended the conference as chairman of DBS Bank. The conference is the private sector counterpart of the IMF. CPF has the knowledge base to export your services in the domain of social security administration.

So do our schools, polytechnics, universities, hospitals, LTA, NEA, in their own knowledge domains.

Even my old ministry, the Ministry of Finance, can export its expertise in helping other administrations to introduce consumption taxes, such as GST and COE, with the least political cost. Enough of thinking only about possibilities.

Remember that knowledge is power only if applied with insight.

I have distributed an article by David Ignatius of The Washington Post on page 12 of the Wall Street Journal of March 12, 2007 for you to read and reflect.

Headed 'Higher-Ed Superpower', the article begins with the lead: 'When people think about American power in the world, they usually list the country's forbidding arsenal of bombers, aircraft carriers and troops.

'Yet America's greatest strategic asset these days might not be its guns, but its universities.'