Singapore’s growth and transformation from a developing nation in the early 1960s to the successful and thriving economy it is today has been the source of much fascination for many observers. Ours is a story that appears to defy conventional economic theory; it has attracted criticism from some quarters, particularly for being too “firmly state-directed”. Part of this is due to an overemphasis by some on specific details of Singapore’s economic development, without understanding the thinking that underlies our approach.
“We (the EDB) talk to companies, listen carefully to them, what they are thinking, and what they think are possible markets and new businesses.”
A closer examination of Singapore’s economic development strategy demonstrates that the role played by the Government in anticipating new and emerging opportunities is not incongruent with market forces. Indeed, both elements have been and will continue to be key to Singapore’s continued long-run growth.
SINGAPORE’S APPROACH TO INDUSTRY DEVELOPMENT
Most governments identify industry sectors to focus on. Where they differ is how these areas are chosen and what actions are taken to support their growth. In practice, the Singapore Government’s approach can be described as a threestep process: Listen, Test, and Act.
LISTEN (TO THE MARKET)
Market players (i.e., private sector companies) determine the success or failure of a business idea. Recognising this reality, Singapore Government agencies are in constant contact with businesses, listening closely to their perspectives and requirements.
Through the process of investment promotion for example, the Singapore Economic Development Board (EDB) continuously gathers feedback from existing and potential investors in Singapore. Ongoing dialogues with industry leaders, international advisors and futurists ensure that the EDB keeps abreast of industry, technology and demographic trends.
"We have been talking to young people here (in Singapore) on their hopes and aspirations, what they are interested in, and what can they do well in. We are here to create real jobs for real people."
To identify new growth opportunities, the EDB also attunes itself to the career aspirations of Singaporeans by engaging with tertiary level students, potential entrants to the job market, and those already in the workforce. For instance, the interest of young Singaporeans was an important motivation for Singapore’s push into “green” industries and clean technology. With globalisation and increasing mobility, notwithstanding the financial crisis, Singapore will lose our top talent if we do not ensure that there are good jobs in growth sectors that excite Singaporeans.
As a knowledge-based economy, the need to listen and match the aspirations of Singapore-based talent with the needs of businesses is also important because companies establishing operations in Singapore do so expecting to fill most of their positions with people already living here. It would not make economic sense for companies to set up in Singapore if the bulk of their workforce had to be sourced from abroad.
Through processes such as the Economic Review Committee (from 2001 to 2003) and the Economic Strategies Committee, the Government engages a wide range of stakeholders as well as the general public in a national conversation about the growth directions that Singapore should adopt. These interactions help to ensure that Singapore’s growth strategies and policies do not lose sight of the two fundamental objectives of Singapore’s economic development: sustained long term growth, and good jobs for our people.
Businesses are profit-driven and decide on investments that make sense for them in the long run. Even if the Government decides to explore a new growth area, the initiative can only succeed if it passes the rigor of the marketplace. Firms must decide that Singapore’s value proposition makes commercial sense for them before they locate here.
Manufacturing, for example, continues to make up a significant share of Singapore’s GDP (approximately 25%) as firms find that it continues to make good financial sense for them to be here. Competition in manufacturing has evolved from one concentrated around production factors to one that encompasses entire supply chains. Companies such as the Renewable Energy Corporation have chosen Singapore to locate their new worldscale integrated solar manufacturing complex, citing access to technology centres and research programmes, as well as market access as key reasons for doing so.
“Companies are very rational. The critical thing is whether their Singapore plant is the most productive in the world or not. If it is, they keep the plant. If not, they close it down.”
Our investment incentives are structured to build local capabilities, and to encourage firms to continue reinvesting and expanding for the long term. They are not used to subsidise the continued operation of otherwise non-viable ventures in Singapore. This discipline extends to all aspects of Singapore’s economic strategy.
ACT (TO SEIZE OPPORTUNITIES)
Singapore’s economy is small and dependent on external markets and international capital. It is therefore imperative that we differentiate ourselves in the global marketplace, build relevant capacities, and be in a position to act decisively when opportunities arise.
“We have to be at the forefront of this game. If we are not, someone else will.”
Today, Singapore has built up a strong track record of being able to offer businesses a unique proposition based on four key strengths which we refer to as TKCL: “Trust”, “Knowledge”, “Connected” and “Life”.1
With a world-class talent pool, strong infrastructure, and business-friendly regulatory environment, Singapore is one of the few places in the world where design, research and development, manufacturing, brand development and corporate headquarter activities can co-locate, complement each other, and thrive.
Building on Singapore’s strengths and recognising that Asia is the next growth story, EDB and its partner agencies are actively refreshing our economic development strategy, positioning our city-state as a home for business, innovation and talent, and strengthening Singapore’s brand for business. We believe that Singapore is well positioned to capitalise on opportunities arising from the region’s growth. Asian markets are not homogenous and, as such, foreign companies hoping to break into these markets will need a better understanding of them to succeed. Singapore, with its attributes of TKCL and a host of supporting and complementary industries across the entire value chain, is an attractive home in Asia for companies seeking to expand their operations in the region.
SINGAPORE’S ECONOMIC ECOSYSTEM
The process of Listening, Testing, and Acting, means that economic policymakers are in tune with the changing needs and aspirations of companies as well as its people. The economic landscape we have today is a result of market forces; it is not one shaped by an economic ideology that picks favourites based, for instance, on national affiliation. Indeed, given the realities of globalisation, the debate over whether a company is foreign or local has become moot.
Nevertheless, there is a perception that local companies have been disadvantaged by the strong presence of foreign multinational corporations (MNCs) in Singapore. The reality is that local companies have benefited tremendously from this growth. For instance, the supplier base for MNC operations in Singapore has become increasingly local. Many home-grown companies such as MMI, Sunningdale and Venture, have successfully partnered MNCs, both locally and in their regional expansion.
“The world is changing, opportunities are changing; you need to be clear in your mind how you are approaching change, to identify for yourself what the opportunities are and what the challenges are going into the future.”
Singapore’s aerospace sector is another example where strong links between local firms and foreign MNCs have led to the growth of a highly competitive industry. Our local companies, SIA Engineering and ST Aerospace, are amongst the world leaders in airframe maintenance and modification. They have multiple partnerships with Pratt and Whitney, Rolls Royce and other major manufacturers, spanning engine overhaul, nacelle, landing gear, hydraulics and component repair. These, together with the presence of other complementary global manufacturers and local small and medium enterprises, have resulted in a comprehensive aerospace cluster that is at the global forefront of aerospace maintenance, repair and overhaul.
Naturally, Singapore is proud when local firms grow to become internationally recognised brands. In recent years, an increasing number of local entrepreneurs have also spawned promising business start-ups, many of which have become industry leaders. An example is Hyflux, with its expanding footprint in Singapore, China, Middle East, North Africa and India. Together with SPRING and International Enterprise Singapore, the Singapore Government hopes to nurture more of such home-grown businesses going forward.
PREPARING FOR THE FUTURE
Singapore’s choices for industry development have not been decisions made on the spur of the moment. For example, the development of the biotech industry dates back to the 1980s when EDB started studying the industry and recognised that we needed to build up our capabilities—this resulted in the founding of the Institute of Molecular and Cell Biology in 1987. At the same time, by the late 1990s, Singapore had become a key node in the global manufacturing network of leading pharmaceutical companies such as GSK, Sanofi-Aventis, Schering-Plough, Merck, Wyeth and Pfizer. With the completion of the Human Genome Project and the capabilities that we had built up, the timing was opportune in 2000 for Singapore to mount a bigger push to promote the Biomedical Sciences sector.
The Singapore Government will continue to Listen—to market participants, futurists, and Singaporeans, Test—ideas with the market, and Act—on opportunities. In today’s fast-evolving economic landscape, no one can predict the next big idea with certainty, but through Listen, Test and Act, Singapore stands prepared for emerging opportunities and will be in a position to capitalise on them.
ABOUT THE AUTHOR
Bernard Nee is Executive Director of the Strategic Planning Group at Singapore’s Economic Development Board. Julia Yap is Assistant Head in the Strategic Planning Group.
- Trust expresses the Singapore character of trustworthiness, integrity, quality, reliability, productivity, and rule of law. Knowledge refers to our commitment to high levels of education and skills, complex manufacturing, high valueadded services, IT competency, and R&D. Connected expresses our physical and trade connectivity, as well as the network of family, friends, and fans of Singapore. Life highlights Singapore as a great place to live, learn, work and play.
- All quotes are from Mr Lim Siong Guan, Chairman of EDB from October 2006 to June 2009.