I'd like to invite PM to begin with his opening remarks right away before we proceed with our dialogue.
PM, thanks very much, Zakya. Good evening, everyone. Very good to be here. Many thanks to the Press Club for inviting me. I know it's a speaker series, but I'm not giving a speech. I don't even have a prepared text. I'll just say a few words in line with the theme, and then, as Patrick said just now, I think it's better we open up for questions and have an interactive session.
We are in the midst of perhaps the most important transitions to the global order since the end of the Cold War. I think all of us understand that the stability of the old order is fading, but the new dispensation is not here yet. So it's a very messy transition, one marked by immense flux and uncertainty.
And this is not just a passing phase. The transition will take time, which means that it will shape the world as we know it over the coming years and perhaps even the next decade or longer.
During this period, geopolitical power, I think, will continue to become more distributed because the world is moving away from a system that is dominated by a single center of gravity to one that is more multipolar in nature.
But not all poles are the same. The US remains a dominant power for the foreseeable future. China has risen to be a peer competitor to America. Europe remains a major force. India is rising rapidly, and around the world you have middle powers all becoming more active, be it individually or in various groupings, including here in Southeast Asia, ASEAN.
So it's a far more complex geopolitical environment, and in such an environment we see more jostling for influence as well as more intense competition. Unfortunately, countries are now more willing to use force and pressure to assert their own interests and to get what they want.
Some of that contest spills over into actual conflict, and sadly we do see more conflicts happening around us. But the contest is not confined to military battlefields. We see it playing out across many different domains, in trade, in technology, and in supply chains. We see this in the continued erosion of the rules-based global trading system and also the weaponization of potential choke points and vulnerabilities. So all in all, we are in a world that's more dangerous, more fragmented, and also more unpredictable.
Singapore will have to find our own way forward in this new environment. Fortunately, we are moving forward from a position of strength because we have built trusted institutions, deep capabilities, and also a strong reputation developed over many decades. But we know we cannot stand still, and we have to adapt, transform, and change to stay relevant.
And that's why we undertook a major review recently of our economic strategies. The sense from the review is that our broad directions remain sound, but as the world changes, we too have to adjust and adapt. And let me just share briefly three areas. First, we have to sharpen our value proposition for the world because we do not take our place in this world for granted, and so we have to continue to find ways to be relevant.
Take semiconductors, for example. Singapore today is a key node in the global semiconductor value chain. We supply 10% of global chips output and 20% of chips equipment production. That's considerable given how small we are. And it's an achievement made possible because we have invested steadily in this space and built up an entire ecosystem supported by R&D, talent, infrastructure, and a very solid base of local suppliers.
So we have to do the same in other areas and basically develop hard-to-replicate advantages and strengths in other areas, in existing industries like finance, advanced manufacturing, and logistics, but also in key growth sectors like AI and quantum computing. Given our size and scale, we of course cannot do everything, but we have to be exceptional in the few things we do that matter to the world.
So that's our first strategy. Second, we are continuing to step up assurance and support for Singaporeans, especially in an era of rapid change. This is not new. We have been doing this consistently over the years, and in recent years we have provided even more support through initiatives like Forward Singapore and SkillsFuture. But going forward, we do expect change to be faster and more frequent. And so we are thinking further in this term of government, in the coming years, of additional moves we can make to strengthen our support system for households, for families, for workers.
Because ultimately, our belief is that the best form of social protection for Singaporeans is to enable them to stay adaptable, capable, and employable throughout life.
Third, we are building more resilience. In the past, countries and companies alike operated on efficient just-in-time operations. Now, in today's world, everyone understands that resilience matters just as much as efficiency. And we've learned the lessons too from the COVID pandemic as well as the current disruptions in the Middle East.
So we are doing more, and resilience cannot be built overnight. It cannot be improvised only during an emergency. You need to have it built from the outset. And again, this is not new. It's always been our approach. But given the state of the world, we believe we have to be much more deliberate in thinking about resilience in everything we do.
So take energy as an example. With the current crisis in the Middle East, we've been impacted, but we have been able to find a way to navigate through the crisis because of the strategic decisions we took decades ago. We have no oil and gas in Singapore. Yet we have been able to develop Singapore as an oil refining and trading center. We built Jurong Island as an energy and petrochemicals hub. We built underground oil storage in Jurong Rock Caverns. And that enabled Singapore to plug ourselves into global energy flows.
And so when the supply from the Persian Gulf was disrupted, companies here were able to quickly adapt and source for alternative supplies. That's a huge advantage for us. And we are not done yet. So in our next phase, we have to think further about how else can we strengthen energy resilience. It means thinking about the next phase of Jurong Island, what more we can do to be a more effective and relevant energy hub. And increasingly our focus is not just about energy security but clean energy security, and that's why next year we are embarking on an independent IAEA review of Singapore's feasibility to deploy civilian nuclear power.
So these are three broad areas where we are making strategic adjustments, and it will translate into new policies and programs. But most important of all, for Singapore to think about the next phase and to succeed in this next phase, is our ability to maintain solidarity and unity. We cannot fully control how the world changes, but we can choose how we respond. And that response must come from Singaporeans ourselves.
Today, we are a far more diverse society than ever before. People from different backgrounds, with different aspirations and perspectives, are here. And that diversity is a tremendous source of strength. At the same time, we must be able to pull people together, find common ground, and continue to forge consensus on the key issues that matter to Singapore's future. So even as the world changes, our greatest strength remains the same, and that's our ability to stay united and move forward together as one people.
The world may become more fractured, but Singapore must become more cohesive, and that's how we continue to thrive and flourish in this next phase. Happy to take questions.
Thank you, PM. If I may follow up a little on some of the points you raised. I think one of the largest concerns for many, whether it's individuals or businesses, is the ongoing conflict in the Middle East and its impact on regional security and global energy flows. I think in April you raised the possibility of stagflation, right? But at the same time, the recent numbers signal there's some dissonance: 6% economic growth in the first quarter, factory activity is still up in May although it was slowing. Are there, do they continue to be grounds for concern, and what should we watch for in the months ahead?
We continue to be concerned. The first quarter growth was solid. We breathed a sigh of relief. I mean, it's good that it ended up better than we expected, and it reflects the diversity and strength of our economy, that we have diverse engines, and so even if some are down, others continue, and we have been able to achieve good growth. But the outlook remains uncertain, and there are two reasons. One, we have not fully... there's a time lag. We have not felt the full effects of the crisis yet. For example, electricity price, the tariff today has not reflected the entire increase in oil prices. That will only be felt in the next quarter. So it's coming.
That's one reason. But the second reason is that globally, I think the global economy has been able to adapt better than most people expected. Take, for example, the flows from the straits, through the Straits of Hormuz, that accounts for 20% of global oil supply. But the global economy today has not suffered a 20% loss. That's because of rerouting through the Red Sea and other sources. It's because of alternative supplies from other oil exporters. And it's also because of the drawing down of inventories.
So these buffers have helped to cushion the impact up to now. How long will the disruption last, though, and how long will these buffers last? That's an open question. And then if the disruption, if the closure of the Hormuz Strait and the disruption continues for more months and the buffers start to dwindle, for example inventories start to be drawn down, then surely at some point the impact on the global economy will be more severe, and then you may have more shortages, and then you may have more impact on demand, and then Singapore will definitely be impacted.
That's on the growth side. On the inflation side, we also expect inflationary pressures to rise. As I mentioned, the electricity price is just one example. There's a lag. It will be coming soon. We have not also fully accounted for inflation in areas like fertilizer and food. So there are downside risks, and we do expect more pressures to come on both growth and inflation in the second half of the year.
It's quite sobering. I think one of the other areas that the ESR looked at quite squarely was on ensuring workers remain resilient in their careers. And one of the issues, you know, people are feeling is this sense that AI is going to have an impact on jobs. Would you be able to elaborate a bit on the government's approach to helping workers master AI to stay ahead? But also, are there maybe two or three other pressing priorities that maybe people can think about coming together on and finding solutions to?
Sure. Well, first of all, you mentioned it's sobering. I must say we don't start out by trying to give alarming information just because we want to, you know, get people to wake up to these harsh realities. We start out by providing as objective an outlook as we can. Sometimes, and in fact many times, we end up doing better than expected. That doesn't mean that we were wrong initially. It just means that we perform better than expected. That's something we should be proud of, and that's something we should be happy about.
I hope this year turns out the same way, that our initial assessments turn out to be more pessimistic and then in the end our growth is better, but no one can tell. It's very uncertain, and as I said, the risks are weighted on the downside. On AI, I think that's a big concern that many people have, particularly the impact on jobs. I would say this about AI and jobs. AI will definitely have an impact on the labor market. Tasks will be automated. There will be disruption for sure. But what is very uncertain is overall what's the net impact on the labor market, and will we end up with more jobs or fewer jobs at the end of the day in the longer term.
Really, there is a lot of uncertainty here, and we should have some humility in saying we do not know the answer. No one can predict what the future will be. I'm always reminded, way back in 1930, the economist John Maynard Keynes wrote a letter to say his grandchildren, because of technology, will eventually have 15-hour work weeks. How many of you are working 15 hours a week?
So this concern has been with us for a long time, that technology will make us more productive and we all will end up with more leisure and less work. But you draw a straight line and you extrapolate from that, and we always tend to underestimate the ability of humankind to create new opportunities, to use our free time and our creativity to create new value, and that's very unpredictable, that no one can predict that. So I really don't know what will happen in the future with AI and jobs. No one knows.
But what we can, what we do know is that there will be disruption. Existing jobs, existing roles, existing tasks may be automated, processes will change. The disruption, the pace of change will accelerate, and that's what we are concerned about in Singapore, and that's why we are focusing on that aspect of AI, helping companies to use AI well to improve their productivity and operations, and then in turn helping workers to adapt, reskill, upskill, to be able to take on better jobs even as the company transforms.
And I think in Singapore we can do that. We are small enough. We have a strong tripartite partnership, so we can guide the way AI is deployed in our country to make sure that it complements workers, to make sure that AI benefits workers and serves humanity, not the other way around. We will do that in Singapore. And that's, I think, the other part about AI that we can have some certainty over, which is we are not passive bystanders. We have agency.
Ideally, of course, the world comes together and forms a framework for how AI is developed. In today's world, I think that's a tall order. Very hard for America, China, and the major powers to agree on such a framework in the near term. Realistically speaking, we should not rule that out. I think we should keep emphasizing that. And even in the recent meeting between the two leaders, President Trump and President Xi, AI safety was something that was talked about. So hopefully there will be opportunities for us going forward to develop such a framework globally for responsible and safe use of AI, which is critical not just for jobs but for a whole range of potential threats, cybersecurity, terrorism, many other things. I think that's essential, much needed.
But where Singapore is concerned, while we try our best on the global front, within Singapore itself, we have agency, and we will shape the use of AI in such a way that it is done responsibly, that it complements workers. We can do so through regulations. We can do so through our tripartite partnership, and we can consider also how human decisions remain important, how humans are kept in the loop across the different areas, and harness AI for the benefits of everyone in Singapore.
You asked about other areas. I would say another important priority for us is on resilience, as I mentioned just now. And when people talk about resilience, they often think about government policies, stockpiles, and infrastructure, and all that is important. But resilience cannot be built from the top down alone. It also needs to come from the bottom up, from the ground up. And I think, I do think in Singapore, Singaporeans are resilient people. You see that time and again whenever we have faced crisis in the past, and most recently during COVID, where Singaporeans adapted, we made sacrifices, and we looked out for one another.
Of course, ideally resilience is built not just only in the times of crisis, it's also reflected in our everyday actions. And so whether it's AI, you want workers, you want individuals to take the initiative to pick up courses, to learn how to use the tools. Well, when it comes to energy crisis and the disruptions we face, we hope that people will start to take the initiative to use energy more responsibly and efficiently, to prepare themselves mentally for any potential disruptions down the road, and also to look out for one another.
And I think these are simple everyday actions that we can all take to become a more resilient people, because at the end of the day, resilience is about the character of our people. It's about how we respond during difficult times.
Thanks, PM. One last question for me as moderator before I open to the floor. Two years ago, PM, you spoke about a renewed social compact and a refreshed Singapore Dream as pillars of what Singaporeans, you know, would like to see in our next phase. Now we've crossed SG60. What's your assessment of how far along we have come on these?
We've made progress. But these are things you can't achieve just in one or two years or even within a term of government. It's an ongoing journey and a work in progress. And that's why I mentioned just now we will take further steps to strengthen our social compact, to look at ways to further strengthen our social support system across a whole range of different areas for families, housing, education. These are things on our agenda for this term of government.
But the social compact goes beyond policies and programs. It's really about upholding trust in our system. Trust that this system works, that everyone has a fair shot in life, that everyone can be assured of the basics in life here, and that if you ever have a setback, there will be support provided for you to recover and bounce back stronger. Trust that there will be opportunities for all to realize their potential and to be the best versions of themselves. And that trust is essential. That's what we are really trying to do.
And part of that is also about broadening our own attitudes and mindsets about what success means. Success cannot be just about following a single path or blindly following what others are doing. Success must mean, you know, encouraging every individual to discover their own strengths, to develop their strengths fully, and then use that to contribute to others in society.
And I'm very encouraged when I meet young people that more of them are thinking that way, defining success on their own terms and contributing in their own ways. And I'm also very happy, since we are here at the Singapore Press Club, to say that our own media, every now and then I see more stories showcasing young people choosing their own paths, and I'm glad that you are doing this. I would encourage you to continue doing so, because by highlighting these role models, you will encourage and motivate more young people to chart their own path and build their own dreams.
Thanks. On that note, let me open the floor to the dialogue, and we'll structure it this way in two parts to better guide the discussion. I guess we'd like to invite questions on two broad topics, and maybe for the first part we can raise questions about the current wider environment and Singapore's response, including on the ESR perhaps, and then for the second part we can talk about some of the more domestic big challenges facing Singapore as well as questions you might have on the media.
Are there any questions, initial questions? And it'd be good if you could introduce yourself and your organization, and also keep the questions short. Is that the gentleman in the middle? Kayang? Yeah, there will be mics. Yeah.
Good afternoon, PM. Kayang from Lianhe Zaobao. I have a question because since we are looking at so many changes, you know, both external and internal, do you think the current cabinet structure is ready to tackle all these problems? Do we foresee a change in the reshuffling of the cabinet soon? Getting right to the meat of the issue. And especially, you know, like it's been a year since the cabinet has been formed, and we have recently had a reshuffle, so maybe a bit of your thoughts on whether we will see a different cabinet coming up.
I thought Zak asked for external questions about the external environment, launching right away into cabinet. Why don't we take one or two more? Yeah. Manu.
Good afternoon, PM. Mano Subnani. I've been editor of two papers here, Business Times today, and now I'm authoring a few books. My question, you touched on AI. I think AI is going to upend our lives. I mean, it's a revolution. So I'd like you to, in the sense of at least a vision. I think, you know, it's more than just jobs. It's going to change the whole way we work and we live and so on. And I think on an even broader basis, I'd like you to try and tackle the question of: are city-states like Singapore, are we better off in the AI age, you know, or are we worse off? Meaning, not only for our growth but even survival. So the question of security, the question of, you know, livelihoods for the people and all that, I think comes into play. So I'd just like you to think aloud on that if you can.
Sure. Elaborate a bit on that. Yeah. Thank you.
Thank you. One more. Okay. Should we take... I saw the hand, the gentleman.
Thank you. Andrew Staples, Fortune. Prime Minister, thank you very much for sharing your thoughts today. Next year Singapore will be celebrating its 62nd anniversary. ASEAN will be reaching 60, and Singapore will be chairing that group throughout the year. I wonder if you could share some thoughts on what the priorities will be for the agenda. The three areas that you spoke of earlier on value proposition, resilience, support and so on. Will that be informing your chairmanship of ASEAN next year? Thank you.
Sure. Thank you. Let me take these three, and I'll start the other way around, from the external then to the domestic. On ASEAN, we take over as chair next year. We are thinking through what will be the key priority areas. The points I mentioned about value proposition and relevance as well as resilience certainly are very important to ASEAN, but the two overriding themes that ASEAN has been working on are, number one, deeper integration.
It's progressing. We are doing well on trade and investments, but there's still so much more that we can do to bring our economies together to make it really seamless for companies to interoperate across different ASEAN economies. Not just, you know, we are virtually tariff-free now, but there are still non-tariff barriers. There are regulatory restrictions. There are ways in which we can make things more seamless.
So, and then we can also look at connectivity in other areas, not just in trade and investments or air connectivity, but people-to-people connectivity, digital connectivity, payments connectivity, transport connectivity, our power grid connectivity. So these are all areas that we are continuing to pursue, and certainly will be one of the key focus for our agenda.
I think across the board, ASEAN leaders are quite clear that we have to be more united in order to navigate this new global environment. Within, you know, within ASEAN we have such a diverse range of economies, but individually we are just too small. But we have to stand together, and ASEAN becomes a collective of 700 million people, a sizable economy, and then we have heft, we have influence, and we are better able to navigate the challenges around us.
The second broad area that ASEAN continues to work on is partnerships, because ASEAN cannot operate alone. ASEAN has always wanted a region that's open, that's inclusive, where we engage all the major partners, whether it's US, China, or for that matter other major powers like Europe and others, or even emerging groups like GCC. So we want to maintain that regional order that's open, that's inclusive, and we want to find ways to strengthen links with other groupings, not just the traditional partners.
So we've been looking at ways to strengthen the engagement with the EU, with Europeans, for example, with the GCC, for example. These are also areas on the agenda so that ASEAN can be even more relevant. We can strengthen cooperation with all these key partners and bring them together here in the region, and I think that also maximizes our chances for continued stability and prosperity in this part of the world.
So that's on ASEAN. On AI and the broader perspectives on AI, I would say I think it's a major plus for us. There are also risks that we have to manage, all the things I talked about earlier, not just jobs but security, disinformation, you know, all sorts of things that we have to think about, not just ourselves but with other countries. But overall, we see this as positive because we can harness AI well to really transform processes and operations to become far more productive.
And in a city like Singapore where we are always labor short, you talk to companies and employers, they are always looking for people, and we cannot afford to, you know, just keep importing labor. We need to be more productive. I think AI can be a game-changer. The key though is not just to, you know, run AI chatbots and have a very superficial use of AI. The key is really to embed AI and start thinking about how it transforms processes across all organizations, and that will take time. I think we are still in a very early stage of this.
And this is true across all technology revolutions, whether it was electricity or the internet. At the start everyone gets excited, very hyped up. It's all about just getting acquainted with the technology. But the actual transformation of companies and organizations, the development of new business models will take time, will take some years, and along the way there will be hype, there will be some companies that fail, don't do it well, and then there will be successes. So we are going through that in the AI revolution now, and that's what we are trying to do in Singapore to get companies to take AI seriously and to really think about how they can transform themselves using AI.
The public service is doing it already. So we are taking it very seriously. We're looking at how our own internal processes as well as processes that we have to serve customers, to serve Singaporeans, can be improved with AI. And we're getting companies to do it, and we are supporting companies to undertake that journey.
So I think for us, the value proposition and the way for us to succeed and do well in AI is not so much for us to be able to develop the biggest and best frontier models. That's not our competitive advantage. But as a small city, to be an AI application hub where AI models, AI applications can be tested, can be applied in real-life use cases, and then can be scaled up further.
We have formed the National AI Council to coordinate this work. We have started our meetings, and I think there are many interesting applications that can be considered involving companies that will apply their know-how and expertise into the various sectors. So we are looking at advanced manufacturing where there are very interesting use cases. Certainly in...
logistics in our airports and seaports. As we automate further all of these operations, AI can be a tremendous game-changer and can really add to the competitive advantage of our air and sea ports, and we will still need the people. So it's not about cutting back jobs. We will still need the manpower, but we can really enhance our throughput for our airport and for our seaport. We are looking at applications in healthcare. We are looking at applications in finance. So in each of these areas, I think there are many potential exciting applications that will really improve lives, improve productivity, and eventually put Singapore on a much better and stronger position.
Finally, on cabinet, the short answer is I'm always thinking about how to strengthen my team. It's never a finished product, and so it's, you know, I'm thinking about internally who else can be better deployed into different roles. I'm thinking about how I can bring in from the back benches new people. I'm thinking about recruiting for the next round as well. It's always on my mind, and when I have any updates, I'll be sure to share them with Singaporeans in due course.
