Speech by Law Minister K Shanmugam at the Harvard Club Dinner

10 Dec 2009 Posted in Speeches

President of the Harvard Club of Singapore, Ms Nina Yang,
Harvard Club Alumni,
Ladies and gentlemen,

1. Introduction

1. Thank you for inviting me to your annual dinner. These are interesting times in Asia. I have therefore decided to speak to you about some of the challenges that we face and the opportunities that we have and what we can do about them.

2. The dominant political philosophy over the last 20 years

2. And by way of background on how we can meet the challenges, and seize the opportunities, I will first say a few words about governance and our political system.

3. The Berlin Wall fell in 1989. Since then discussions on politics have largely assumed as axiomatic, that the ideal political system is the Liberal Democracy as practised in the West, particularly the US.

4. Every country and political system is usually compared against that as the ideal and is graded accordingly. Most discussions in the media, and the academia, proceed on this basis.

3. Difference between Governance and the nature of the political system

5. In this intellectual environment, there has not been a lot of focus on the relationship between two different but connected ideas:
   1. Governance, and
   2. A political system that is capable of delivering governance.

6. Good governance would mean the delivery of benefits to the people:
   1. Rule of Law
   2. Maximum opportunities
   3. Housing
   4. Economic well being
   5. Healthcare
   6. Safety and security
   7. A civilised environment which allows the individual to be free.
   And so on.

7. A political system is the means to deliver good governance.

8. Often, in the past, there was not enough public understanding even of the fact that the two concepts are different. One was merged into the other, and there was an unstated presumption that if you had the formwork of democracy, then you will get good governance.

9. Much discussion which passes for political comment usually started and ended with a critique of the political system, without an adequate analysis of the need for governance.

10. But, the two concepts are different. We see increasing acknowledgement internationally, that the difference between two concepts should be understood. I have made the point elsewhere. This week, the Straits Times carried an interesting interview, with a political analyst, who made the same point.

4. Political System

11. If we agree that good governance is the goal, then we need to ask: can we automatically assume that the political system as developed say in the US, will also deliver good governance to all other societies?

12. To answer the question, I would quote Alexander Hamilton. He said:

“The political system has to be tailored as closely to the country as a coat to a man”.

13. Before I go on, let me make one point clear: I am not entering into the “Eastern versus Western values” debate; nor am I making the point that Eastern societies do not value human rights.

14. My point is more basic: Political systems are essentially systems for delivery of governance. And while some values are universal, nevertheless a political system will work best in a society if it is designed to fit that specific society.

15. If we accept that political systems have to be tailored to suit the needs of each country, then the debate must really be on how the political system should be structured for a specific country, rather than whether the system approximates the US or UK or any other model.

5. Singapore

16. Now, let me turn to Singapore. I am not going to repeat points I have made elsewhere on Singapore’s exceptionalism. In essence, in my view, there is a clear difference between how interventionist and activist our Government has to be, and how the Government and the people have to act together, compared with larger and more secure countries, which can take a more laissez faire approach.

17. Our size, geography and strategic situation have imposed limits on us. There are no natural resources nor any strategic space or large pool of manpower. We survive on our wits. To succeed we need to:
    1. get investments into Singapore;
    2. encourage local entrepreneurship;
    3. become a sophisticated service centre, and
    4. ensure safety, security and stability.

18. To achieve this:
    1. We need a Government that formulates policies for the long term;
    2. A talented population which can deliver world class performance; and
    3. Collective effort between the Government and the people to implement the policies that have been formulated.

19. This formulation, with its emphasis on activist Government, is somewhat different from the classic laissez faireapproach. I don’t think that the laissez faire approach will deliver the most optimal results for us.

20. What does this model mean in philosophical terms? One strand of liberal theory would suggest the State can intervene to protect society from an individual. But, it should not intervene to require the individual to act in his own good or for the benefit of society. That could work if there is no real need for Government to act to ensure the survival or the economic success of the State. But would that theory hold, in a small city state which has to react quickly to externalities and which may need to mobilise the population for such action?

21. Many other countries are not as finely balanced as us – few are as small and dependent on maximising the opportunities in the external environment as we are. Hong Kong is not a real comparison – it has a dependable hinterland. China will look after Hong Kong.

22. With this background, on the essential need for good governance for us, I will outline a couple of external challenges.

6. Challenges

23. We have several challenges. I will only mention a couple of challenges, both external.

1. Security

24. The first challenge I will mention is security. If you look at the map of Southeast Asia, you will see several countries which have had political instability in recent years. Such political instability allows militancy to take root and flourish.

25. There are also insurgencies in a number of countries. These insurgencies are long running and are based on ethnic or religious differences.

26. These insurgencies may attract more militants to their cause. There is a risk that the militant cause could spread wider, causing even greater regional instability. They may also serve as breeding grounds for terrorists.

27. There have also been reports of extremist groups using religious schools as a means of recruiting potential militants in some of these countries. That provides them with captive recruits.

28. These threats cannot be taken lightly.

29. So if you look at the map of Southeast Asia, the situation is not pretty. In fact, it is a troubling picture. The potential for the situation to get worse and for that to spread exists, if the underlying issues that have led to the insurgencies and militancies are not tackled effectively.

30. We do not have to be alarmist. But, we must work on the basis that we could be a high profile target. And in any event, we will be affected in one way or another by what happens in the region.

31. Our responses cannot only be kinetic. We have to also build real bonds of trust within our society, across racial and religious lines, so that our community responds cohesively in the face of such threats. A laissez faire approach will not work, as some Western countries are finding out. The Ministry Home Affairs and the other Ministries put in a lot of effort into this and work with our people: an example of what I had earlier referred to as the need for the Government and the people to work cohesively together.

32. We have, for example, a variety of continuous Community Engagement Programmes, to inter alia, build inter ethnic confidence. We have other projects as well.

33. Many countries come and look at how we are doing this – and realise that what we do is worth learning from.

34. There are also countries in the region where questions of ethnicity and religion have been raised with increasing intensity in political discourse.

35. Our own ethnic and religious mix somewhat mirrors that of other countries in this region. Thus we have to therefore prepare our population actively, to try and ensure that there is no automatic reaction here, along ethnic or religious lines in response to events in the region. We have been doing that.

36. Thus we have to be constantly alert because while the region is making progress, it still has serious governance issues.

37. And we need to ensure that our own Governance is of the highest quality – to deal with the challenges. As a financial and services centre, servicing, inter alia, this region, we will feel the impact of events in the region.

38. I will now deal with a second external challenge.

2. Big Power Relationships and Interests in this region

39. This region is of interest to major powers, including the US and China.

40. They are likely to chart a path of peaceful co-existence. But at the same time, we have to recognise that both countries, as well as other powers, have interests which may not always be coincidental. The US Pacific Fleet navigates through the waters in Asia. The US has substantial economic interests in Southeast Asia. China’s economic and diplomatic interests are also growing rapidly. History shows that big powers will seek to influence smaller countries. And where big powers compete, their desire to influence smaller countries could sometimes be quite strong. All of this is natural. China also has claims in the Paracels and the Spratleys. Other regional countries make competing claims.

41. Countries in this region and the regional entities (like ASEAN) have to deal with all these issues. Singapore has to be aware of the way these issues evolve and are dealt with. And Singapore has to be very clear about the direction it wants to take, in its own sovereign interests, in a dynamic, fast changing environment.

42. That will require nimbleness and long range thinking. On that note, I will now turn to the opportunities.

7. Opportunities

43. I have spoken about a couple of external challenges. But on balance, the opportunities in our external environment far outweigh the challenges that we face.

44. If you combine the populations of China and ASEAN, you get nearly two billion people.

45. A substantial number of this two billion people are hardworking, smart and want to make a better life for themselves. Thus, this vast area will progress. And China will progress rapidly. That can have very positive economic consequences.

46. Thus, I am optimistic about Singapore – strongly so. We are in an unique position to be part of the progress of East and South East Asia as well as the dynamic progress of India. We have a real opportunity to be a leading, dynamic city, servicing a region of tremendous wealth, albeit that wealth might be unevenly spread. We will not be the only city doing that, but we can be among the leading group. And we have some unique advantages that many others do not have.

47. But to get there, we must be able to tap into these opportunities. That goes back to good Governance and cohesive society: with a clear idea of our interests, our abilities, what the opportunities are, and how we can be part of the regional growth.

48. I will also emphasise another point, which I see as being important to our continued success – our openness to talent inflow.

49. We have succeeded so far because we have been liberal on talent inflow. To continue to succeed, we need to continue with that policy.

50. Businesses invest in Singapore because they know that they will be able to bring in the talent they need. The financial services sector employs several thousands of Singaporeans. It also employs many foreigners. If we told the banks that they cannot bring in foreign employees than we put the jobs of Singaporeans at risk as well.

51. Let me illustrate with a concrete example. This week I met a CEO of a major blue chip foreign bank. That bank employs nearly 6,000 people in Singapore. Many are in high paying jobs. One thousand of them are foreigners on Employment Pass. The other 5,000 or so are Singaporeans or PRs. He told me that the great advantage Singapore had, (for them), compared with almost any other place they operated in, was the ease with which they could bring in employees from all over the world. He told me, with some pride and satisfaction, that there are 40 different nationalities amongst his 1,000 foreign employees. He considered it quite remarkable – they can bring in talent from all over the world, and these people contribute to our economy. As a result, they were confident about expanding in Singapore even during the crisis.

52. He also expressed some concern, as to whether our policies on talent inflow will change. The debate in the newspapers about non Singaporeans in Singapore has obviously been noticed.

53. What should our policy be? Should we be restrictive? Five thousand Singaporeans and PRs get employed by the bank. If we had been difficult about the 1,000 foreigners, would there be the 5,000 Singaporean jobs? The number will be much smaller. In the end protectionism does not help. And the value add to the economy, from the extra business the bank does, in Singapore, is significant as well. It grows our financial sector, thus benefiting many other Singapore businesses. If we are clear minded, we can help our financial sector grow quite well.

54. The same holds true across other industries. Foreigners help us increase the pie – and that gives jobs to Singaporeans.

55. In today’s Straits Times, there was an article on the fierce competition for brain power. The article highlighted the US, China and India. Foreigners have made significant contribution to the US economy. The story listed some statistics: Immigrants were named in 25 percent of the World Intellectual Property Organization patent applications filed in US in 2006.

56. I quote:

“In 2006, immigrants contributed to 72 percent of the total patent filings at Qualcomm, 65 percent at Merck and 60 percent at Cisco Systems. And contrary to claims that immigrant patent-filers crowd out US-born researchers, studies show that immigrants tend to boost patent output by their US-born colleagues. These immigrant patent–filers emerged from the US university system, where foreigners now dominate the ranks of those seeking advanced degrees in science, technology, engineering and mathematics. For example, during the 2004-2005 academic year, roughly 60 percent of engineering PhD students and 40 percent of master’s students were foreign nationals. Beyond Intellectual contributions, Chinese and Indian immigrants have been key entrepreneurial drivers in the US.”

57. But now there are concerns: China and India are attracting back the talent. The US risks losing bright people. The US is taking some counter measures. This is a war for talent.

58. We have been successful in attracting talent. We must continue on that path and compete for talent. If we are not open to talent, we will quickly lose out internationally.

59. This has become even more important in the aftermath of the financial crisis.

60. Some countries have been forced, either by reason of their financial position, or for political reasons, to come out with policies that do not favour the attraction and retention of talent. This has been particularly so in respect of finance industry professionals.

61. In this environment, we have stayed calm, rational and have kept to our talent and investor friendly policies. Our tax rates are sensible. We are a good, stable place with a stable financial system. If we keep to our policies, we will, in the growing Asian environment, continue to grow strongly as a financial centre.

62. We have to always remind ourselves: We do not have resources. We depend on investments. Many countries compete for investments. Investors will assess where best to invest. If we make it difficult for them to hire foreign workforce, then the investors will go elsewhere.

63. Investors are also rational. Where they can do so, they will employ Singaporeans. We must create the right conditions for investment and must also create the right conditions for employment of Singaporeans. And we have done so – as shown by the fact that through this recession, many more foreign workers lost their jobs. Singaporean jobs were saved by Government policies (like the Job Credit scheme) and the Government working together with the unions and employers.

64. Let me also share a couple of examples from the legal sector.

65. Within the legal services sector, the top tier of cross-border, transactional work has long been dominated by global firms, primarily of UK and American origin. The Government had to consider whether to open up our legal sector to foreign law firms. There were serious good arguments as to why foreign firms should not be allowed to practice Singapore law. But on balance, the Government assessed that it was beneficial for Singapore to open up, and a decision was made last year to open up.

66. We gave out six Qualifying Foreign Law Practice (QFLP) licences last year, to allow foreign firms to practise Singapore law. The practice of Singapore law may not have been necessary for the kind of work they are doing. But, giving them the licences gave them buy-in within the Singapore legal scene. They have expanded their practices here, creating more opportunities for local talent. Other non-QFLP foreign law firms, seeing our cosmopolitan outlook, have also invested in their Singapore practices.

67. Now there are nearly 1,000 foreign lawyers in Singapore. Many were here before the sector was opened up. We want to be a top international legal hub. Opening up increases the opportunities for Singapore lawyers, increases the technical quality of Singapore lawyers. And of course there is a whole series of downstream benefits in having 1,000 highly paid foreign professionals here.

68. Our arbitration sector has also benefited tremendously from a new blue-ribboned Board at the Singapore International Arbitration Centre, comprising nine members from seven different countries. That Board was appointed this year. All of them are well-known worldwide. It is chaired by an Australian, Michael Pryles, who is also a member of an English set of chambers. Recently, he became a PR. His enthusiasm, and those of many other arbitration practitioners based elsewhere, has been crucial to our push for Singapore to be an arbitration venue of choice.

69. If Singapore wants to be an international arbitration centre, we cannot take a parochial approach.

70. Maxwell Chambers, our new arbitration complex (not yet formally opened) started taking hearings from August. It has already seen more than 40 arbitration hearings. The arbitration sector has huge growth potential. Singapore stands out as a good place to conduct an international arbitration. Such arbitrations would involve disputes running into hundreds of millions of dollars.

71. Singapore is on the world arbitration map now. Everyone benefits: the parties, because this is an open place where they can get excellent arbitration service, and Singapore, as a service provider.

72. But of course while we want to be an attractive place for talent, we have to ensure that the system is not abused. And we have to ensure that ultimately Singaporeans continue to benefit from the economic progress and get full opportunities. Singaporeans have expressed their concerns about some aspects of immigration of foreigners into Singapore. Our immigration policies must also ensure that Singapore and Singaporeans benefit. The Government has indicated that our immigration policies will continue to be refined.

73. Further point: Many Singaporeans feel passionately about Singapore. It means something to be Singaporean. That passion has to be acknowledged. We must continue to nurture the Singaporean identity and make it meaningful.

8. Conclusion

74. Let me conclude by making four points:
    1. One: we do face significant challenges – we should be alert to them and deal with them effectively.
    2. Two: there are even more significant opportunities – we must be smart enough to seize them.
    3. Three: we need good governance and a cohesive society to do both.

75. My fourth point is this: In pursuit of good governance we have gone about building a system that is in some ways unique to Singapore. That has attracted a fair degree of criticism. When criticisms are made, we should consider them carefully. We should neither assume them to be correct nor be dismissive.

76. And there is no need to adopt a stance where we accept that all judgments passed on us must be correct. We can and should be more confident about what we have achieved. We have achieved success by not blindly following prescriptions.

77. Let me illustrate by reference to one example. Earlier this year Parliament enacted the Public Order Act (POA). There was criticism in some of the international media – how this is a further restriction on political rights and so on.

78. The POA was debated in Parliament against the backdrop of the ASEAN meeting in Thailand which had to be abandoned due to crowd violence.

79. The POA was enacted to give additional powers to the Police, particularly during major international meetings like APEC.

80. We had a very successful APEC meeting in Singapore. We did not erect a fence round the meeting venues, and we did not declare a holiday. Nor was there overwhelming police or security presence. All of that has happened in other countries. The delegates had pleasant, fuss free meetings. One of the business delegates from a top Korean company told me how much more efficient and friendly it was, compared with other APEC conferences that he had attended.

81. In that context I would like to show a picture on what the Danes propose to do, to detainees, during the current Climate Conference in Copenhagen.

82. And it is reported that the Danes are spending over US$120 million on security, for the Conference.

83. If we had decided to put detainees in cages like this, what do you think the reaction of the international media would have been? We usually get a lot of stick. Sometimes different standards are applied to our actions. We have to know that, and not expect that criticisms will be free of bias.

84. So let’s take criticisms as par for the course, and do what we believe is right.

Thank you.

Last updated on 26 Nov 2012