“Futile for Singapore to compete on old formulas”: Inderjit Singh Dhaliwal

Inderjit Singh Dhaliwal, a former parliamentarian aligned with Singapore’s ruling People’s Action Party (PAP) during his political career, reckons that Singapore must radically evolve rather than relying on the old formulas that have sustained it.

With a career spanning corporate roles at Texas Instruments, as well as an entrepreneurial career with the founding of United Test and Assembly Center (UTAC), a semiconductor firm, in 1998 — valued at US$2b in 2001 and mostly funded by Taiwanese friends — according to details in a Business Time interview dating to 2006, he has also built up Tri-Star, a trading and services firm, with his brothers, as well as Solstar, a consumer electronics distribution business with a footprint in several African countries.

Currently an adjunct professor and member of the Board of Trustees of the Nanyang Technological University (NTU), as well as Chairman of the board of NTUitive, the Innovation company of NTU.

In an email interview with Venture Views, Singh weighs in on topics focused on Singapore’s economic future. He also touches upon matters of international relations with Asian Great Powers such as China and India, as well as the need to fundamentally review Singapore’s economic paradigm in order to remain sustainable.

Edited excerpt:

Since leaving politics in 2015, what’s your take on how the contemporary state of Singapore’s economy and its prospects have evolved, especially in light of the threat to Singapore’s status as an Asian hub? Contenders like Hong Kong, Bangkok, Jakarta and Kuala Lumpur offer scale and scope economies Singapore cannot offer, as well as favourable cost structures.

We entered the era of Industry 4.0 about a decade ago and Singapore has faced disruption caused by my areas — technology, deglobalization, changing demographics in Singapore and the region, the rise of China and other Asian economies. We face a very challenging era ahead. Singapore was already risking losing our hub status.

Covid-19 not only accelerated the disruptions we have been seeing earlier but also resulted in new realities we did not see coming. However, while we are facing greater challenges, the Covid-19 pandemic has also greatly set back the progress of the many competing economies in Asia.

Global supply chains have been greatly disrupted and a new normal and a rebalancing of global supply chains will happen soon. Singapore should take the opportunity to turn the challenges we are facing into future opportunities for our next phase of economic development. But we have to move fast if we want to become a leader in the new normal ahead.

Despite the competition, Singapore offers deep economies of scope, is regarded by the World Economic Forum as an emerging global startup hub and has developed itself into a city-state with an economy of ecosystems with its multi-hub status and overlapping business clusters. Can we evolve this model further and maintain it as an enduring advantage or are we reaching the limitations of such a model?

Singapore has a great starting point because of the investments the government has made in the past in making Singapore business-friendly and also in attracting start-ups to be based in Singapore.

In most of the rankings, Singapore has done very well because of input factors but in terms of output in the area of innovation and start-ups, we have yet to see a great performance. So if we deep dive into all the reports we are seeing, we will realize that we have not been able to do a great job in enterprise creation from the investments in R&D.

Commercialization of technology and creating of great Unicorns are measures where we still lag the best cites in the area of innovation. We should therefore focus on how we can do better in this area of commercialization, enterprise creation and creating many more global companies out of Singapore.

Singapore has built up and marketed itself as a globally competitive entrepreneurial hub. What’s your take on Singapore’s entrepreneurial ecosystem; its international perception as a ‘startup paradise’ and its long-term prospects as the economic centre of gravity shifts back to Asia?

I refer to the Nobel Economic prize winner’s Joseph Stiglitz’s article on the Miracles of the Asian Tigers many years ago, “ Some Lessons from the East Asian Miracle“, where he characterizes how Singapore success was not driven by productivity but by pumping in input factors. He argued that such economic growth is not sustainable.

Singapore continues to focus on this old approach in trying to build the future economy, including in the area of the start-up economy. The approach taken for start-ups and innovation in Singapore is also not far from the old input factor-driven approach.

We must focus on how we can commercialize technology better, support start-ups beyond the initial start-up phase. We cannot do everything, but there is one area where we can take a lead on given our hub status, and the great infrastructure, technology creation and skilled workforce. This is in Singapore becoming a prototyping factory of the region, if not the world. If we do this well, we can become a very important part of the new global supply chain.

With the current Wuhan coronavirus pandemic creating an unprecedented economic shock in 2020, how do you perceive the state’s response and the moves made to support local small & medium enterprises (SMEs) and MNCs with a presence in Singapore?

The initial response from the government has been swift and fast, focused on helping save jobs and in keeping credit flowing to companies, especially to SMEs. The bridging loans and the higher risk-sharing by the government has helped to some extent companies manage cash flow.

I would say that the 4th budget the government released was not carefully structured. It was the same as what was done in the previous 3 budgets. I would have like to see a more targeted use of the $34b 4th budget that was released just before the GE2020.

I feel while the JSS (i.e. Jobs Support Scheme) is a good scheme, it was not necessary for many large companies that were not severely impacted by cash flow. So, we had many healthy companies that received huge sums for the JSS which I think was wasteful.

The government should have taken the opportunity to be more targeted by looking at the needs of SMEs and tailoring the help based on the need. While a broad and blunt approach was ok with the first 3 budgets of 2020, it was not necessary for the 4th one.

I see an opportunity for the government through the many funds they operate — through the sovereign funds, through schemes that support credit and early and growth-stage investments to be used to fund companies that can help create stronger companies that could become our future pillars of the economy. At this level, it has been business as usual so far, without any new ideas or initiatives to support SMEs and start-ups.

With the implementation of the national security law in Hong Kong earlier this year, there are signals that Singapore is set to gain from that development as a financial centre for Western interests and enhancing Singapore’s overall international status. International businesses reorienting themselves to mitigate enterprise risks and shifting assets and personnel to Singapore. Any insights on this development?

While this is an opportunity for Singapore, the government needs to watch against the money flowing into Singapore being deployed to the residential and commercial property markets. During the 2008/2009 global financial crises, we say a similar flight of money from risky countries to Singapore and that caused property prices to rise.

We must think about the future of Singaporeans’ and their children’s ability to own affordable pricing. While HDB can be a source of affordable housing we must also allow Singaporean aspiring to own private properties to have these properties withing their reach. We can welcome money into Singapore, but we can have rules that restrict investment in properties. The government made the mistake in 2008/2009, we should not repeat the mistake again.

We are seeing more mainland Chinese tech and finance group establish a presence in Singapore. Should there be a concern over Chinese influence operations — a view expressed by Bilahari Kausikan in 2018 — and the risks to Singapore’s social fabric? Outside of mainland China, Taiwan and Singapore are the only ethnic Chinese-majority states in the world but have very different cultures. What can we expect and how do we contend with these challenges, especially with the need for Singapore’s strategic autonomy given China’s perception of Singapore?

The Chinese have realized that their alternative source of technology (other than the USA) is Singapore, and they are coming to Singapore in huge numbers. They know the in the past couple of decades, the Singapore government has spent $61B in R&D investments and there are great technologies that are sitting on shelves that they want to strengthen their China companies by acquiring the technologies we have developed in Singapore and therefore are rushing to set up base in Singapore.

While we are an open economy and should not stop companies of any nationality to come to Singapore, as government and as Singaporeans, we should also lookout for opportunities to see how we can commercialize the R&D ourselves.

I suggested Singapore being the prototype factory of the world. This will need investments and we have that kind of money, but we are not allocating the money correctly and many fundable companies get ignored. These then become the target for acquisition by the Chinese companies and funds.

I, therefore, urge the government to reallocate the money they have been giving to entities like NRF, Temasek and other agencies and create a Venture Building Fund, that can strategically look for the assets and technologies that can be invested to create future companies and therefore become our future employers.

Given your role at Nanyang Technological University (NTU), which has a large mainland Chinese community, what is the risk to Singapore in terms of threats to intellectual property (IP) and associated economic interests, especially given close Singapore-China economic links? Mainland China’s mercantilist policies have undermined global innovation in telecoms and Chinese competition is arguably a threat to Singapore. Meanwhile, a recent spy case poses reputational risks to Singapore, with China leveraging calls to help an ethnic motherland creating risks in undermining Singapore’s domestic and international interests.

I see China not as a threat but as an opportunity. China is a huge market, has great talent and is hungry. They want to dominate the world in a number or areas and have already done well in areas like AI and robotics and they want to extend their leads.

How I would deal with China is not by giving away the many years of efforts and the huge amounts of money we have invested in developing technologies to China too easily. Instead, we should as a nation focus on commercializing the technologies we have developed and own the IP.

But then we can work with China to bring those commercialized products and services to the Chinese market. We should not give up our IP and technologies too early and too cheap to the Chinese.

We should develop our IP and technologies by commercializing them and then partner the Chinese to when we want to go into mass production at large scales and when we want to sell in the Chinese market. This needs urgent attention of the government, otherwise, all our assets and IP will one day belong to the Chinese and we will not have much room to manoeuvre.

What’s the approach we need in managing our relationship with India, the other Asian power? Mainland Indian professionals in Singapore are subject to negative sentiments alongside other foreign communities, especially amid efforts to revitalise commercial ties. Meanwhile, as an emergent Great Power, its domestic challenges hobble it, yet despite the economic shock of 2020, PWC estimates it still has the potential to reach a US$10 trillion GDP by 2034.

We must not give up on India. I like to use Silicon Valley as an example. If we remember history, Silicon Valley was once the ‘Wild Wild West’. But despite the chaos, today the Valley is the most valuable place on earth where technologies, corporations and wealth are created.

While India looks chaotic, despite the chaos, India is progressing and as the population taste the success of economic prosperity, India will accelerate and grow her economy and that kind of growth will be more sustainable in the long term than a centrally planned economy like China. I am looking at 30 to 50 years from now. My bet is that India will be more successful than China.

Singapore should not place all our eggs in China. We have always been friends to all nations and open to all. We must continue to have the policy of not taking any sides and remain friends to all. This is how our founding leaders positioned Singapore and this is how we should continue to do so.

Singapore is at the nexus of a number of free trade pacts, among them ASEAN, the USA, EU, China, India, EAEU and others. Yet there’s a perception that local SMEs and entrepreneurs lack the exposure and grit to leverage this natural advantage in trade connectivity, operating deficiently in the international business arena. What can be done to close this shortfall?

The main problem for our start-ups and SMEs is that they lack funding support at the growth and expansion stages. Whenever there are market gaps, it is wise for the government to step in and not wait for the private sector to sorts things out. I see a huge gap in financing growth-stage companies that the government has not done a good job in addressing.

Singapore’s economic model is under pressure given the rising regional competition and various other headwinds. Moreover, there is a perception that there is negligible political space for discussing a rethink of the government’s role in the economy, with plenty of self-affirmation and the government mistaking criticism for dissent. How can we move forward from here?

I feel that the government has continued to rely on past models that were successful in the past given the state of development of the world and the region and Singapore. While they may see some near-term gains, they may be sacrificing the areas of our economy that could help us cement a stronger future economy.

We need to focus on creating a strong base of local enterprises. If we look at the rate of job creation in the past 2 decades in the USA, large corporations net job creation was ether zero or negative and most of the jobs were created by start-ups and SMEs. I believe this is the same as in Singapore. What this tells us is that we must focus on creating many more start-ups and SMEs that will be the pillars of our future economy and that can become the future MNCs of Singapore.

The government formula of job-creating still remains to attract large MNCs into Singapore. This is a losing battle if we look at data on job created by parge corporations in the last 2 decades.

We should accept the fact that the future economy will have many more companies that may not be unicorns but are valuable additions to our economy and in helping to create jobs. We should stop betting on the giants only. It does not have to be a zero-sum game.

But for now, the budget allocations and support provided by the government is lopsided with greater resources. effort and money allocated to the continued attraction and development of the MNC based economy.

Looking at the case of Nokia’s decline and its relevance to Singapore, what are the sort of reforms that can ameliorate the risks and challenges associated with what was fundamentally a spiralling decline for what was once a global telecoms leader?

Singapore risk going the way of Nokia if we don’t focus on the start-up economy and in strengthening support for SMEs. We must realize the value Singapore brought to the MNCs in the past can be better provided at lower costs in many cities in the region. It is futile to compete on the old formula. I project that Singapore has just another 10 years, until 2030, to become a Nokia if it does not change the formula for economic development. We need 180 degrees change. It is an urgent matter.

What should stakeholders consider in the continuing contest for Singapore’s future and sustaining its economic relevance, especially with democracy demonstrably being no longer the only path to economic prosperity?

Unless we change our approach, our old social compacts that worked and kept government stable in the past will collapse. Over-reliance on government may not work in the future and when people see that the government can no longer help them improve their lives, we will see people getting disillusioned with the government and seek change.

Capitalism is also under threat as we see the widening of income gaps around the world, not just in Singapore. But Singapore is an open city-state will see greater disruption as jobs go away but costs continue to rise as we allow foreigners to keep driving up property prices and cost of goods and services. It is a tough balance for the Singapore government.

While we must remain open to talent from around the world — we are just too small to produce our own talent to compete with giants — how do we continue to guarantee a good quality of life for all Singaporeans who are willing to work hard? This is a dilemma that could destabilize Singapore.