Singapore Government Press Release

For the last one year the government has been doing a stock-taking and an audit of Singapore�s position in the context of regional and international developments. Global competition is keener, and our competitiveness is under challenge.

For example, the airline industry is going through a revolution. It started in America when they deregulated. Many American airlines went bust and the few that survived were lean and competitive. Now the American airlines are prepared to compete world-wide with an "Open Skies" policy. The Europeans and the Japanese and the smaller countries are not willing to take that risk. But they will be forced to eventually. The Europeans have started "Open skies" among themselves. Within Europe all their airlines can fly from anywhere to anywhere any number of times. This means that within five years, there will be a few, maybe three or four, lean, highly competitive European airlines and then they will go for open skies and that will force the Japanese to do the same. Whether we like it or not, we will have to compete against the global airlines. We already have "open skies" with the US.

Airlines are now a global business. People travel across the globe, not just within regions. Very few airlines are big enough to compete on their own across the globe. So BA links up with Qantas and is seeking a tie-up with a big American airline to straddle the globe. We will have to do likewise and choose our partners. It is like running a 400 metre relay. If we cannot produce a relay team on our own, we have to join three others to make the fourth to enter the finals - a European, an American airline. We already have a partner from Australia and New Zealand. SIA cannot stand still.

In this environment, Singapore Airlines must become globally competitive or it will decline. There are two ways of cutting costs and increasing productivity, to trim down staff and change working conditions. If you look at Air France and British Airways, you will see the European way, with their entrenched trade unions and inflexible rules. Air France workers went on strike to stop privatisation because the workers knew that privatisation would mean a slimming down of the workforce and a change in work schedules to increase productivity. The government had to retreat. Next, British Airways having declined, made a remarkable come back after privatisation. But the trimming of staff and costs was not good enough and the new CEO pressed with further cost-cuttings. The result was a strike that has set BA back temporarily. Such strikes to advance sectional interests at the expense of the company and of the nation, can be ruinous for an airline. Singapore Airlines simply cannot afford this. Air France and BA can recover because they each have a large 60-million population base to support such a recovery. Singapore has only a 3m base. No airline in the world has the luxury of not trimming down its costs. However in Singapore, we do it differently. Our workers and unions must and will work together with management and the government to change work schedules, send work to be done overseas or hive-off non-core airline activities to subsidiaries, in order to make SIA more competitive. This will be done with the co-operation of the unions and workers. The costs saved will be shared fairly between managers, workers and shareholders.

Let me give personal examples of the competition SIA now faces. When I travelled from London to Hamburg on BA this June, I was impressed by the quality of their service. Nearly all the stewards and stewardesses were young, slim and bilingual, speaking English and French or Italian, German or Spanish, and the announcements were made in all these languages. Two of the girls had been recruited in France and Italy, bilingual in English and their mother tongues - French and Italian. This was a short an hour-and-a-half flight. Yet they had a printed mini menu for all passengers, just for style and to show hospitality. They had a brochure on their new image as a "world airline". Their route map covers all the cities of the world, with the different routes in different colours to show those which were run in conjunction with Qantas, or with British Mediterranean Airways, or Com Air and Air Liberte. British Airways is now selecting a successful American airline to include in its team.

Compare this to SIA. I flew from Singapore to Paris at end May. Although three quarters of the passengers were French, no announcements were in French. No steward or stewardess could speak French. Yet there are many French girls, trained air hostesses, available in Paris. SIA must supplement its Singapore girls with bilingual girls from the countries it flies to. And these additional foreign staff need not necessarily be based in Singapore, whether they are pilots or stewardesses. Of course, work scheduling will be more difficult. But other airlines do this.

If we do not improve and innovate, we will lose out. Given time, and co-operation by Australian trade unions, BA will be able to transform Qantas. Qantas now has chefs on board to prepare the food for the First Class passengers.

Next, our financial market. An international banker of considerable standing and repute told me recently that during the currency tension on the Thai baht and the Filipino peso, there was a ""buzz", that ""electric" in the Hong Kong financial market which was not present in Singapore�s. Hong Kong dealers were ahead with the news. I asked why? Was it because they had more freedom of the press and better information flow. No. Hong Kong�s and Singapore�s information flow of Dow Jones or Reuters or the other agencies that sell financial information was the same and simultaneous. The difference was the information by word of mouth from people in the know. There are more Bangkok and Manila businessmen, both ethnic Chinese as well as indigenous Thais and Filipinos, residing and doing business in Hong Kong than in Singapore. These Bangkok and Manila businessmen include those in the banking business who were in touch with people in high places in their own home capitals and therefore in the know. They had begun hedging against the devaluation of their own currencies. The markets were alerted to what they were doing. The moment they hedged, the foreign exchange dealers started to hedge on behalf of their other clients. The information spread in Hong Kong by word of mouth, much faster than in Singapore.

There is a lesson in this for Singapore. We must try to be a bigger business centre for ASEAN businessmen, for the top ASEAN companies, just like Hong Kong. We must make them feel at home. Those of you who have gone to Hong Kong will have seen big commercial buildings with the names of well-known companies from Thailand, Indonesia, the Philippines, Malaysia and Singapore, and not just their airlines. We have to be a cosmopolitan Asian city for all peoples from the world over, Americans, Europeans, Arabs and Asians. We must make these Taiwanese, Chinese, Korean and Japanese businessmen feel welcome in Singapore and encourage them to site their regional HQs here. Then when there is any unusual movement in their capitals, we will have that ""buzz" and that ""electric" in the air.

I am told another reason for this ""buzz" in Hong Kong is that foreign exchange dealers and share brokers, foreigners and locals alike, socialise much more at lunch time and after office hours, in bars and restaurants than they do in Singapore. When they fraternise, they exchange confidential information. Singaporeans, I am told, have comfortable homes and, after work, prefer to go home. I hope that at least during lunch the foreigners and locals will be socialising and sharing information to make Singapore a better informed and quicker-moving market.

SIA and MAS are merely two examples of areas where we have re-examined our assumptions to revamp our policies because of global competition, the result of breakthroughs in technology, especially information technology.

There are other important areas like PSA and CAAS. One result of this re-examination of our challenges is the need for a better and differently trained workforce, one able to respond to changes in IT. In other words, we had a differently-oriented education system, from primary school upwards to ITE, secondary schools, junior colleges, polytechnics and universities. Education and training are the decisive factors. It is the software we put into our people. And the software has to be regularly updated, just like MS Windows, to give them the ability to meet challenges and adapt to changes.

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