All of us know that the key to success in the Knowledge Economy is human resource development. This is a particularly acute challenge for Singapore because of our relatively small population base and our lack of natural resources.

Opening our door to foreign talent is an important part of our human resource policy. Without the large numbers of them working in our public and private sectors today, our economy would be much poorer off. Without them, our universities would be depleted and most of our R&D centres would have to close them. Our manufacturing economy and our financial sector would be crippled. Even our arts and entertainment scene would be much poorer off.

The import of foreign talent is, however, only a means to an end. The end is the overall well-being of Singaporeans. Whether we are successful or not is, in the end, to be measured by how much we are able to raise the economic contribution of individual Singaporeans to the global economy.

Human resource development requires both public and private investment. The market does not provide a complete solution because the benefits of educating a citizen or training a worker does not accrue to the individual alone. In economic terms, we say that investment in human resource development creates significant externalities.

An educated individual benefits not only himself and his family but the community as a whole. This is the justification for public investment in the education of the young, from kindergarten all the way to university.

A company is prepared to invest in worker training to the extent that the company is the principal beneficiary of that investment. If the worker leaves the day after he is trained, the beneficiary will be the new company he works for. If this is a general problem, no company will want to spend money on training. It will be cheaper to harvest from other companies. For this reason, EDB, PSB and NSTB take an industry approach towards the training of certain categories of workers. Since the benefits accrue to all companies in the particular industry, the investment should be industry-wide.

The Knowledge Economy brings new challenges to human resource development. For example, the mobility of talent across borders makes it harder to justify high public subsidy of graduates. In effect, the taxpayers of a country which has lost its talent to another country are subsidizing that loss. The US, which is a magnet for the world�s talent, is being subsidized by the public support of tertiary education in countries like India and China. The problem of bond-breaking by our scholarship students has the same underlying cause. Public scholarships in Singapore are justified on the basis that the recipients will benefit Singapore as a whole, whichever company they work in so long as it is in Singapore. But because they speak good English and can fit easily into other English-speaking countries, we run the risk of losing them.

A less open society like Japan, with language and culture as a natural barrier to entry and exit, has more leeway. For a long time, Japanese companies invested heavily in worker training because the benefits go back to the companies. Lifelong employment in Japan is now going through a crisis but, even then, the benefits of human resource investment will remain in Japan. In Singapore, we are much more exposed. Because our padi field is small, the water flows out quickly.

There are therefore two major aspects to the challenge we face in human resource development. On the one hand, we must increase the amount of public investment without which we will not be able to maintain the high level of foreign and domestic investment in the Singapore economy. And, on the other hand, we must contrive it such that the greatest benefits of that investment are to be reaped in Singapore itself. I will elaborate on that later.

First, increasing the amount of public investment in human resource development. We are putting more resources into public education at all levels. After defence, education receives the biggest budgetary allocation. In addition, other agencies like EDB, PSB and NSTB will invest in human resource development at the industry and company levels.

At MTI, we recognize that companies have become less willing to invest in their people because of growing job mobility. Research by OECD confirms this. Companies expect workers to pay for their own training and they rather hire ready-trained workers from other companies and from other countries if necessary. The shortening life span of knowledge compounds the problem.

Even in the United States, where over 85% of the workforce have more than 12 years of education, government involvement in workforce development has increased. A Workforce Investment Act was enacted in 1998 to provide greater public support. Special state boards have been set up last year to implement five-year strategic plans for workforce development.

Likewise, the British government launched a new National Skills Agenda this year. Its primary objective is to boost workforce skills to support industry development and, more importantly, to sustain the country�s international competitiveness.

MTI will work closely with the different industries to ensure that we respond quickly to changing human resource requirements and keep up with the competition. Among the many workforce development programmes we have launched are the industry training centres established with companies like IBM, Motorola and Philips. We have also revamped the Skills Development Fund to facilitate worker training in companies and made PSB the lead agency for such training.

PSB has put in place a national framework to help companies achieve People Excellence in a systematic way. The framework has 3 major components.

The first component is information. To help companies keep up with the latest developments, a web-based online information system called WorkforceOne will be set up. It will have links to leading research centres around the world. WorkforceOne will provide information on the best global practices and the latest trends. It will provide useful benchmarks for companies to use.

The second component comprises capability development programmes. This brings together the various programmes that are available to help companies upgrade their workforces in an integrated way. Companies can apply for financial assistance from the Skills Development Fund for engaging consultants and for the training of managers and staff.

Today, I am also pleased to announce a new capability development initiative under the Skills Development Fund. The objective of this initiative is to upgrade our workers and increase their employability. It complements other programmes already available. Companies with a higher proportion of unskilled workers will find this initiative particularly useful.

Called the Skills Certification Plan, the initiative offers companies enhanced incentives to implement certifiable skills training for at least 30% of their workers based on the submission of a Skills Certification Plan. The Skills Development Fund will support 100% of course fees for training programmes conducted by external providers leading to industry-recognized skills certification. Companies which choose to conduct such training themselves will receive $8 per trainee hour.

The Skills Certification Plan will support the recently-launched National Skills Recognition System.

The third component is a new series of People Excellence Awards. These Awards will highlight the best organizational models and recognize companies that break new ground in human resource development. There will be a Significant Achievement Award to encourage SME participation in people development. To be launched next year, the new awards will incorporate the current National Training Award. PSB will announce the details later.

Under this People Excellence framework, PSB hopes to enhance the capabilities of 50% of our workforce � or 1 million workers - by the year 2005. It is an ambitious plan but one which is absolutely necessary for us to meet the challenges of the Knowledge Economy.

The complex system we are building to promote human resource development in Singapore is unique to Singapore. We now have in place a system which can only work well here and will not work as well in other countries. This is important because, with globalization, there is always a danger that others will harvest from our fields, from seeds they did not sow.

For example, the discretionary authority which our economic agencies enjoy can only work in an environment which is not corrupt. Otherwise, kickback from public investment will become a roaring business. One visitor to EDB remarked that the system we operate here will be a disaster in the country he came from.

Our tripartite culture of cooperation is also a great economic asset. Because of the culture of cooperation, the whole is much greater than the sum of the parts. Trade unions in Singapore are special because they are highly attuned to the needs of international competition, but they can only play this positive role because our employers play ball.

Like all assets, our tripartite culture has to be nurtured. We must continue to invest in it. This is the reason why the Government supports the NTUC and its training programmes for workers. It is important that we develop the tripartite framework and update it for the New Economy. Allowing junior executives to join trade unions is part of this ongoing effort. So too the proposal to create an apex employer�s federation called the Singapore Business Federation.

In other words, we must upgrade simultaneously the parts as well as the whole. If we neglect human resource development because workers are mobile, all of us will lose out in the end. And if we take for granted the cooperation of unions and employers, the old framework will break down under the stress of globalization and the New Economy. It is on this basis that the concept of People Excellence is being promoted. By itself, the market does not solve the problem of human resource development very well. Let us turn this market failure, so evident all over the world, into Singapore�s competitive advantage.

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