Maiden Speech: Building Our Inherent Capacity

(26th September 2025 Maiden Parliamentary Speech)

Speech: Building Our Inherent Capacity

(September 2025 Parliamentary Speech, by Kenneth Tiong)

Mr Speaker,

I am honoured to address this House as an MP representing the people of Aljunied GRC. This special constituency reminds us of that moment in 2011 when Singaporeans began to dream of a more plural political system, and I stand here today in service of that dream.

I wish to speak on one of the most important economic questions for our country today: what it will take for Singapore to build “inherent capacity.” By inherent capacity, I mean a rooted, high-value, local base of companies and industries. For fifty years, our prosperity has been built on attracting foreign direct investment within a world of free trade. This model served us well. But in a new era of geopolitical blocs and strategic industries, this dependence is a vulnerability. High-value work, hosted on our shores, can be repatriated at any time, leaving our workers exposed.

The ultimate defence for our workers is not a certificate from a course. It is being part of a deep industrial ecosystem. It is “tacit knowledge” - the unwritten secrets of an industry, learned not in a classroom, but in a coffee conversation after work, or overheard on the factory floor. The guarded tricks of building and tuning a foundation model, or advance notice of a new industry standard. It is this sticky, localised knowledge that gives our workers a genuine, defensible edge, justifying their wages and creating the conditions for our best entrepreneurs to thrive.

Of course, we must continue to upskill our people. But skills training alone, unmoored from a home industry, is not enough. A skill that can be learned anywhere can be performed anywhere, often at a lower cost. We must therefore build the “inherent capacity” to foster unique knowledge advantages.

Building this inherent capacity requires a resurrected “developmental state” for our time - a state that actively shapes an ecosystem to benefit our people.

There are three ways to do this: through R&D policy, industrial policy, and foreign economic policy. Today, with only 20 minutes, I will focus on the third pillar: how we engage with the world.

I would like to tell a story about economic integration.

Once, in the 1960s, American giants—Boeing, Lockheed, McDonnell-Douglas—dominated over 80 percent of the civil aviation market. Europe’s national champions - like Sud Aviation, Messerschmitt-Bölkow-Blohm and Hawker Siddeley - were confined mainly to national markets, and had a bleak future if they stayed alone. The industry dynamics favoured the American giants due to large economies of scale, enormous R&D commitments rising 20% yearly between 1930-70, and steep learning curves.

In their enlightened self-interest, they turned to a new policy instrument: a transnational industrial consortium. Airbus, founded in 1970, was designed to preserve the aviation industries of Germany, France, and the UK.

It’s important to note it was not a top-down creation of the European Community. It was driven from the bottom-up by the firms themselves.

Airbus is not a private creation. It arose from a group of state-backed enterprises, and was founded on commercial principles, learning the lessons from the commercial failure of Anglo-French Concorde. State-backing was necessary as the long-duration debt market in Europe was too small to finance this industry alone.

This political decision was made possible by two points of consensus: First, the knowledge that industrial policy was necessary to build inherent capacity - again, a rooted high-value local base of companies. Second, that national industrial policy would likely prove insufficient. Transnational projects would be needed to achieve the necessary scale and competitiveness.

It was sustained by three key points: political-will to provide financing until the consortium hit its first financial milestones; demand-assurance for guaranteed orders in the early years, and partner lock-in via specialisation and workshare agreements for different components.

Above all, it was a 50-50 split in equity holding between France and Germany.

This has proved highly successful for Europe. Today Airbus is the leading civil aviation company in the world, founded 55 years ago on a framework for positive integration - an integration that builds.

Now, let us turn to our own region, Southeast Asia.

The President’s Address and its addenda have told us of the multiple platforms we will pursue for economic growth. We are to deepen engagement in existing trading frameworks, from the CPTPP to our network of FTAs and Digital Economy Agreements. But we have spent years and decades cultivating these types of platforms without fostering that strong base of locally grown companies. Something is missing.

For decades, our diplomatic energy has been spent on the idea of “negative integration” - that is to say, integration by way of removal of trade barriers.

“Negative integration” has been duly implemented. In 2009, the ASEAN Trade in Goods Agreement (or ATIGA) came into force. ASEAN’s website states, I quote: “Through ATIGA, Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand have eliminated intra-ASEAN import duties on 99.65 percent of their tariff lines. Cambodia, Lao PDR, Myanmar, and Viet Nam have reduced their import duties to 0-5 percent on 98.86 percent of their tariff lines. Today, focus is given to addressing non-tariff measures that could have non-tariff barrier effects on the region’s trade and business activities.” (end quote)

Yet a 2019 commissioned study by ASEAN’s Coordinating Committee for the Implementation of ATIGA, found that 10 years after ATIGA came into force, intra-ASEAN trade had not grown any faster than ASEAN’s total trade, stagnating at 25%. Moreover, for a large fraction of trade ATIGA offered no real advantage - either “Most-Favored Nation” rates at zero already meant there were no tariffs to cut, or the special ASEAN discount was so tiny it made no practical difference.

Decades of effort for negligible results. I am not against negative integration, but it clearly is not a sufficient ideal for Southeast Asian integration.

Against it, I believe Airbus exemplifies an ideal of “positive integration” in the industrial sense.

Our region tried a form of “positive integration” before, with the ASEAN Industrial Projects (AIPs) in the 1970s.

In 1977, five projects were designated: nitrogenous urea fertiliser for Malaysia and Indonesia, phosphatic fertiliser for the Philippines, soda ash for Thailand, and diesel engines for Singapore. The equity arrangement agreed in 1980 was fundamentally imbalanced - 60 percent for the host country, with the other four taking 10 percent each. The four non-Singapore projects were geared towards the agricultural industry, a reflection of national development priorities.

The AIPs failed, because national priorities overrode genuine complementation, and because the equity structure was fundamentally imbalanced. States will only enter enduring cooperation agreements when they do not fear that their partners will gain disproportionately.

The success of Airbus holds a mirror to these past failures and shows us a path forward.

Mr Speaker, critics will rightly point out that Europe in the 1960s and 70s is not Southeast Asia today. They will speak of deep-seated political sensitivities, of differing economic priorities, and of the cultural gulf that separates our nations. They are not wrong. These challenges are real and significant.

But I ask: are these differences greater than those that separated France and Germany just two decades after a world war? True partnership is not born from the absence of difficulty, but from the shared will to overcome it in the face of a greater common challenge - the squeeze of geoeconomic competition and knowing that going it alone is a losing game.

Three factors are critical.

First, it requires coalitions of the willing, not committees of the whole. Bilateral or trilateral consortiums of nations. Some must integrate faster, to demonstrate the benefits of a particular integration model.

Second, it demands balanced payoffs, like an equitable 50/50 or 60/40 structure. This ensures every nation has an equal stake in a shared success, bridging a trust deficit that erects non-tariff barriers. Defined payoffs, and the way they are structured, must be negotiated early on. These negotiations reveal the viability or lack thereof regarding long-term co-operation.

And third - today, the industrial bases built across Southeast Asia by foreign direct investment give us a foundation our predecessors never had, that allows us to build complementarity from a higher-base than the agricultural-industrial options available to the previous generation of policy-makers.

I am a believer that foreign investment has been a net positive for this region. Negative integration in ASEAN, via ATIGA and FTAs, has created a stable potential foundation for increased regional trade. But the world is changing - and we must now adapt to that changing world.

Positive industrial integration is not the only option available to us. But it is a necessary diversifier in a portfolio of international strategies. Above all we should not spend all our diplomatic capital deepening a model that is yielding diminishing returns. We need to build a future with real, defensible, and shared prosperity.

This is not a dream. I read with interest in March 2025, the call in the Malay Mail by the CEO of MIMOS Berhad, Malaysia’s national applied R&D centre, calling for strong industrial policy to create a semiconductor chip design ecosystem for Malaysia. To move beyond being a trusted manufacturer for global companies to become innovators.

When I read this call (and others like it), I hear a common developmental language across nations. But to channel these ambitions through national industrial policy is to face the full cost of global competition alone. Singapore should be the partner that de-risks these aspirations by opening a path to stronger, more resilient regional consortiums.

We are in the midst of a global investment cycle in many things. Healthcare, nuclear energy, renewable energy, photonics. Budgetary decisions from the ministry of finance should begin to inform industrial policy decisions of the ministry of trade and industry. We should head in broad strokes to what will be the big buckets of spending over the next 20 years - healthcare, the clean energy transition, maritime industrialisation, education.

To ensure these efforts build our local capacity, government support - like funding and early contracts - must come with conditions. Firms must be required to build deep roots here through local engineering teams, apprenticeships, joint-IP, and guaranteed work for our SMEs.

Mr Speaker, Singapore should champion the creation of new “Airbus-style” commercial consortiums with willing regional partners. In the 21st century, this need not be a bloated state-owned enterprise. But rather the principal client and industrial anchor for an entire ecosystem of SMEs, along with the safeguards to make sure that value flows down the value-chain. Airbus sustains tens of thousands of European SMEs. Similarly, every successful venture in Southeast Asia could allow an ecosystem of SMEs to thrive.

So how do we begin? Our strategy should be modular. We don’t necessarily need to build the entire metaphorical aircraft at once; we can start by mastering a single critical component - the engine, the avionics, the advanced materials. This ‘building block’ approach allows each partner to specialise, making us stronger together than apart. As we prove the model, we can integrate more partners, even from outside our region, to build more complex systems.

And what about scale - how might such a cooperation and integration model be replicated? Once done once, the private sector can increasingly take over. The same unfolding ladder of ideas from AIPs to AIJVs to ATIGA, from positive integration to negative integration. But we must recognise our current lack of inherent capacity. So the state must be the prime mover to catalyse and build it again and anew.

This requires a change in our government’s mindset. The state must be bigger in its ambition to build this inherent capacity and shape markets as only a state can. But it also needs to become smaller, by not competing directly with our own SMEs. Too many local entrepreneurs tell me that once they reach a certain size, their biggest competitor is the Singaporean state and those linked to it.

For too long, the state’s ambition has turned inward, often leading it to compete directly with our own SMEs. No more. Its role must be redefined - the greatest enabler of our local enterprises - not their competitor.

A government that acts as a market-shaper internationally but knows when to retreat domestically creates a fairer playing field for our and our children’s ventures to succeed.

I know that there are many Singaporeans who do not share the views of some - who think that Singapore should focus on doing small things and let big countries do big things. But my message to all is that every ambition has a price. If a nation wishes to be at the frontier, it needs to be prepared to pay that price to cross that bridge. And inherent capacity at the frontier, guarded by protectionist sentiment at the best of times, is today a contested ridge-line, with all nations reawakened to the necessity of inherent capacity. It remains possible, as it always was possible, to cross this bridge, as long as the political will allows. But it requires no illusions about the limits of different growth models. It requires both developmental will abroad, and restraint at home.

This generation must decide what our country’s position is in the whole scheme of human progress. But it is my belief that we are here to catalyse a brighter future.

Thank you, Mr Speaker. I support the Motion.