GLOBAL COMPETITIVENESS REPORT

Mr Seng Han Thong asked the Minister for Trade and Industry what is the significance of Singapore being ranked 2nd in the global competitiveness report.

BG George Yong-Boon Yeo: Singapore has performed well in the Global Competitiveness Report for many years. We have been ranked as the most competitive economy since 1996. However, this year, the US was ranked 1st pushing Singapore to 2nd place.

MTI studied the Report to find out the reasons for this. We found that the change in our ranking was caused mainly by an important adjustment in the ranking methodology, rather than a deterioration of our competitive fundamentals. This year, greater weight has been given to creativity, innovation, and technology in recognition that these are key drivers for sustained economic growth. A new Economic Creativity Index that measures these attributes was put together and given one-third of the total weight.

The US was the runaway winner in this category, far surpassing second-placed Finland which ranked second and Singapore which ranked third. The US' number 1 ranking reflects its strength as the global leader in innovation and technology. The US has a large number of world-class research institutions in both the public and private sectors. It leads in technology sophistication and has a deep pool of talented knowledge workers. It also has very dynamic start-ups and strong availability of venture capital.

As a whole, the Singapore economy remains competitive. We have in fact improved in many of the technology and innovation indicators this year. However, the competitiveness ranking this year is a strong reminder of the increasing importance of technology and innovation as determinants of competitiveness and growth in the New Economy. We still lag substantially behind the US in this area.

Our competitiveness in the New Economy will be driven by how successful we are able to attract global talent and how we can enhance the creativity and enterprise of our work force. We will only know over the long term how successful we are. Judging from the initial response to the Technopreneurship 21 initiative which was launched in April 1999, I am not pessimistic. Rules and regulations to support enterprise have been changed. Start-ups can now list on our stock exchange, our taxation of the ESOP scheme is now more attractive and technopreneurs can set up offices in HDB homes. There are now more venture capital funds and joining a start-up is no longer unusual.

The impact of the New Economy will eventually affect all sectors of our economy. The tradeable sectors have responded the most quickly. Many companies have shifted to higher value added activities in Singapore. These require workers who are innovative and better trained. It is a matter of time before the other sectors are similarly affected. We will continue assisting our less competitive companies, especially some of our SMEs, to respond to the challenges of the New Economy.