Wealth creation can’t be left to chance — Ngiam Tong Dow
AUG 30 — To secure our economic future, we need to seed it first.
In the new millennium, global competition will be more knowledge intensive than resource based. Let me begin with a quote from an article entitled Higher-Ed Superpower written by David Ignatius of The Washington Post in The Wall Street Journal edition of March 12, 2007.
He wrote: “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 strategic asset these days might not be its guns, but its universities.”
Ignatius’ quote brought my mind back to 1976 when the Singapore delegation led by Prime Minister Lee Kuan Yew visited an engineering laboratory at Beijing University.
Our Chinese hosts told us that to overcome the strategic embargo imposed by the United States, their scientists and engineers were engaged in designing and building China’s first super-computer.
A decade later, I read in the press that China had built a super-computer faster than the American Cray super-computer. Today, the race for the fastest super-computers is between the US, China and Japan.
I would like to propose that we apply our minds to two critical issues: First, how do we go about seeding Singapore’s economic future? Second, how do we ignite the spirit of wealth creation in the minds of our young?
I agree with Ignatius’ thesis that universities and polytechnics are indeed a country’s strategic assets. More so for Singapore than other states with their wealth of natural resources and abundance of manpower.
I do not have the statistics but I will not be far wrong to claim that Singapore’s per capita spending on tertiary education is among the highest, if not the highest in the world.
Investment in higher education only enhances knowledge. Knowledge raises the potential of our undergraduates. Yet knowledge is power only when applied with discernment. And potential has to be manifested in performance.
At the recent 2012 NUS Commencement, 6,300 undergraduates and 3,600 post-graduates received their degrees. As I handed out the scrolls to the graduating class of the Arts and Science faculties, I wondered to myself how many of our young graduates will become wealth creators.
A century ago, poor young men left their impoverished homelands of China and India to seek a livelihood in the newly-founded British colony of Singapore. They were men with little formal education.
A fortunate few, through grit and tenacity, amassed fortunes. The recently announced plans to exhume the graves at the Bukit Brown cemetery for redevelopment into a new suburban satellite city remind us of some of our patriarchs who built early Singapore. In a global knowledge-based world, can the great-grandchildren succeed through sheer tenacity and grit alone?
Ignatius’ writing gives much food for thought.
I believe that in the 21st century, we have to take a structured and disciplined approach to wealth creation. It can no longer be left to chance. A random hit or miss process will not do.
As Ignatius has suggested, we have to begin at our universities and polytechnics, for the simple reason that the core role of tertiary institutions is to teach and impart knowledge.
I propose that as part of their final-year curriculum, students be encouraged to form project teams of two of three from the same or across faculties.
The project teams will propose what they conceive to be viable businesses using new or significantly improved technology and processes. Project teams have to demonstrate beyond a shadow of doubt that their ideas are authentic and original.
Olivia Lum, an NUS alumnus, established Hyflux, a leading water treatment company, only after she had researched and improved the efficacy of a desalination process using membrane technology.
Similarly, Sam Goi invented a machine to make “popiah” and “prata” skins mechanically. Sam, you may like to know, is a Singapore Polytechnic graduate.
Start-up companies have a better chance of success if the key founding partners combine complementary skill sets. Outstanding industrial companies, such as Hewlett-Packard and Sony, were founded by partners who complemented each other. One in technology and the other in commerce.
Successful entrepreneurs tell me that the infant mortality rate among start-ups is highest in the initial two or three years. Without a product or service ready for the market, tight cash flows is a constant challenge for the fledgling start-up.
Despite the herculean efforts of the Economic Development Board’s (EDB) Light Industry Service Unit in the 1970s, EDB found it heavy going to process and approve more than a dozen loans to small and medium-sized enterprises (SMEs) each year.
As bureaucrats we were risk averse. So at a lunch with our Chancellor, Dr Tony Tan, then in his capacity as chairman of the Association of Banks, I proposed that our four Singapore banks join EDB in implementing the Light Industries Finance Scheme (LIFS). The Ministry of Finance through EDB would extend a line of credit to the banks for on lending to SMEs with the lending bank sharing half the risk .
When I left EDB three years later, the LIFS portfolio of 3,000 loans incurred a non-performing loan (NPL) ratio of only 3 per cent lower than the overall NPL ratio of the banks. The LIFS succeeded because it was decentralised.
LIFS loan, though necessary, are not sufficient for seeding growth. To seed the growth of new industries and enterprises, the state has to play an entrepreneurial role taking risks alongside the private sector.
Those who take a dim view of state capitalism should ask themselves where Singapore would be without the Ministry of Finance providing equity capital to SIA, Keppel Corporation, SembCorp, ST Engineering and, indeed, even DBS Bank.
Few people remember that the ministry was a founding shareholder in the Mandarin and the Shangri-La hotels.
My modest proposal is for the Ministry of Finance to extend a S$100 million grant to EDB to invest in the equity of say 100 knowledge-based start-up companies germinated in our four universities and six polytechnics.
Incidentally, EDB, established in 1961, was also granted a grant of S$100 million to seed the economic growth of Singapore. That it has succeeded is for all to see.
My plea is for the Ministry of Finance to continue seeding our economy by sharing the risk through equity participation alongside private enterprise.
For a small state like Singapore, this to me is a viable strategy to compete with the giant BRIC — Brazil, Russia, India and China — economies, with their abundance of natural resources and manpower.
In a highly competitive knowledge-based global world economy, our universities are the only strategic assets we have. If we fail to mobilise our universities, Singapore will quickly revert back to the stagnant trade burdened economy of the 1950s.
My generation recall with a shudder the joblessness, slum housing, bad sanitation and petty street crime of our growing up years.
Without a knowledge-based growth strategy, all the glitz and glamour of the new Singapore we enjoy today will simply be a mirage, a footnote in world history. — Today
* Ngiam Tong Dow, the former Permanent Secretary of the Ministry of Finance and the Prime Minister’s Office, is now Pro-Chancellor at the National University of Singapore (NUS).
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.