Positioning Singapore in a New Asia

ETHOS Issue 02, Apr 2007

A TALE OF TWO CITIES — BEIJING AND MUMBAI

Beijing is a city in a hurry. With the 2008 Beijing Olympics around the corner, construction of a new national stadium that resembles a giant "bird's nest" is well underway. On another site, workers are busy installing panels to the "water cube", the new aquatics centre that looks more like a space-age museum than a swimming pool. Meanwhile, a third airport terminal with a 3,800 metre-long runway will soon accommodate the new Airbus 380s. As part of the city's extreme makeover, Vice Mayor Lu Hao, has promised to tackle other challenges facing the city: clearing the city of its pollutive industries, investing in new public infrastructure, creating more jobs, improving social security and raising public health standards. In short, Beijing — symbolising the new face of China — aspires to join the ranks of other major international cities.

In Mumbai, a different buzz fills the air. Cars, buses and people jostle for space as they wind their way through the noon day traffic. Businessmen in their ubiquitous Ambassador cars close deals on their handphones in the sweltering heat. Better known for its Bollywood stars, Mumbai is the financial capital of India: the stock exchange is the primary exchange of the country and most large businesses have their corporate offices in this city. Mumbai, too, has plans to transform itself. It does not have the deep pockets of the Beijing Municipal Government, but that has not deterred Dr D. K. Sankaran, the Chief Secretary of Maharashtra, from having big dreams for the city. Mumbai international airport is being modernised. Mumbai will also be linked to the Golden Quadrilateral—over 5,000 kilometres of four- and six-lane expressways connecting Mumbai, Delhi, Kolkata and Chennai. Mumbai has come to symbolise the city of golden dreams where everyone hopes to be rich.

ASIA'S NEWFOUND PRAGMATISM

Mumbai and Beijing may be very different, but they are the future of Asia. China has been posting staggering growth rates of 9% to 10%, while India's growth has been no less spectacular at 7% to 8%. Japan, too, is staging a comeback after more than a decade of malaise. The simultaneous renaissance of these three powers is unprecedented. Barring unforeseen circumstances, Asia will be the most dynamic region in the world. As millions join the ranks of the middle class across China and India — the numbers of billionaires in China, Hong Kong and India have already overtaken Japan's — the region will experience a new wave of growth.

Underpinning much of this growth is a new mood of economic pragmatism. In India, Nehruvian socialism has given way to what Gucharan Das calls the quiet triumph of "democratic capitalism". A billboard at the recent World Economic Forum meeting in Davos read: "15 Years, 6 Governments, 5 Prime Ministers, ONE DIRECTION". Even China's communism has taken on a new face. China's communist party has been quick to induct entrepreneurs and business leaders into its ranks. Party apparatchiks have given way to MBAs on the factory floor.

Of course, it would be over-simplistic to compare China and India in one broad sweep, although such comparisons are inevitable. China has a headstart over India, having invested billions of dollars to improve its infrastructure over the last decade; India has much to catch up on, but the spirit of Indian enterprise is alive and well. Cash-rich Indian companies have also been making overseas acquisitions in Europe and the US. China's predominantly state-driven enterprise stands in stark contrast to India's private sector-driven approach. Both countries are still grappling with extreme poverty. Growth remains unbalanced across sectors and between regions. Income disparities are widening. Although these two giants are taking unequal steps forward, they are marching to the same tune.

PLANNING FOR SUCCESS

Planning in Singapore is about making the most effective use of limited land resources to create a distinctive, attractive and vibrant city, not only for now but also for future generations to enjoy. Long-term planning for all our various land needs provides the assurance that population and economic growth can be accommodated. This includes providing a choice of different housing types and locations, space to grow businesses, attractive and accessible recreational amenities, and a comprehensive and efficient road and rail system to meet transport needs. Planning also enables Singapore to retain its natural and built heritage, helping to create a world-class city which is not only attractive, but also distinctive and authentically Singaporean.

SINGAPORE'S PROSPECTS AND CHALLENGES

Singapore's prospects have never been better. Growing interest in Asia has led to a flow of new investments, particularly into China and India, from Europe, the United States, and the Middle East. In turn, Chinese and Indian companies seeking to expand their presence overseas are looking to the region. The long-term outlook for the region remains favourable, notwithstanding short-term fluctuations. How can Singapore position itself to partake in Asia's growth? I believe we can pursue three key thrusts.

Redefining Geography as Destiny —Expanding Singapore's Regional Reach

First, we should increase our stakes in Asia's growth. Several trends work in our favour, namely increasing connectivity, the harmonisation of standards, and the growing ties between Asia and the rest of the world.

To elaborate: direct air links within the region are growing and new roads and railways are being constructed. In a matter of time, the whole of mainland Southeast Asia, China and India will be connected in some way or the other. Singapore should ensure it remains well-connected with the region.

Next, with regional economies seeking to integrate with the global economy, we can expect these countries to move towards more rule-based systems, greater rule of law and the adoption of international standards. Leveraging on our own experience, Singapore can help these countries to plug into the global economy.

Likewise, the growing interest of the Middle East, Russia, Europe and Latin America to engage with China, India, Japan and Southeast Asia allows us to pursue new tie-ups and partnerships in the areas of trade, commerce, arts and culture. As their partners, we are unlikely to pose a threat as a challenger. This is the advantage of being small.

Attracting the Next Wave of Chinese and Indian Multinational Corporations (MNCs)—Harnessing Singapore's Brand Name

Although some have questioned the continued relevance of Singapore's MNC-led growth, I believe this model remains relevant. Following the earlier waves of European, Japanese and American MNCs to Singapore, we should now attract the so-called coming "fourth wave" of Chinese and Indian companies seeking to become the next MNCs. Taking advantage of this trend requires us to better understand the business needs of Indian and Chinese companies as they expand overseas.

Bilcare is a good example of how an Indian pharmaceutical packaging company sees value in setting up its operations in Singapore. It has invested US$25 million in a new plant in Singapore with the latest polymer barrier film technology for pharma packaging. This plant is 10 years more advanced than what the company has in Pune, India, and uses much less space and manpower. Singapore will act as its main logistic and distribution base for global distribution. For example, it takes seven days for Bilcare to ship its product to the US from India, while it only takes two from Singapore. Bilcare also hopes to undertake clinical trials for drug companies, thus providing total solutions to the pharma industry, encompassing the manufacturing, packaging, storage, distribution, and disposal of clinical supplies for clinical trials.

Chinese food manufacturer, Royal Meiweizhen, has invested US$10 million to set up a holding company in Singapore. Through Singapore, it hopes to formalise its franchise structure and market worldwide. It is bringing under its umbrella three companies: Beijing Royal Food Industrial, Beijing Royal Science and Technology, and North Green Royal Food Technology. It has several proprietary food preparation technologies which it intends to patent in Singapore.

Bilcare and Meiweizhen are just two examples of aspiring global companies who see advantage in leveraging Singapore's trust, reliability and connectivity. Their investment amounts may be small compared to the more established Western MNCs. However, if we can attract them to Singapore and help them grow their global operations, both sides will stand to benefit in the long-term. Our local small and medium enterprises (SMEs) will also stand to benefit from a more vibrant business landscape.

Building National Globally Competitive Companies? We still need our Temasek-Linked Companies (TLCs)!

In our renewed efforts to attract MNCs, we should, of course, not neglect our own businesses and SMEs. We should continue to groom them. However, these efforts will take time to bear fruit. Our lack of critical mass and small domestic market constrain our ability to develop our own Bilcares and Meiweizhens in the short to medium term.

Meanwhile, TLCs such as DBS Bank, SembCorp Industries, SingTel, CapitaLand and PSA International, have grown stronger and could develop into multinationals. Few, if any, of our SMEs will have similar resources to undertake large-scale projects or stay the course in many of the newly emerging markets. Fewer still can muster the talent.

Any decision to divest these companies at this stage should be considered carefully. Once divested, their main priority will be to maximise shareholder value, rather than building up Singapore's brand name and overall capabilities.

ANTICIPATING CHANGE: NO SILVER BULLET

As policymakers, we sometimes overestimate our ability to influence events, but the problem is that we cannot predict the future in today's more complex environment. The best way forward is to seize opportunities and adapt as we go along. This will require an experimental mindset and a greater appetite for risk, but in our quest for "Blue Ocean" strategies, we should not neglect existing strategies and markets. We may need to redefine what we are currently doing. After all, Starbucks reinvented the cup of "kopi-o". Who would have imagined that Starbucks would be as ubiquitous as our "kopi-tiams" in our HDB heartlands?

IMPLICATIONS FOR THE PUBLIC SECTOR

Asia's resurgence will bring forth new challenges for the public sector. For the Government, the most pressing issue today is how we organise ourselves to thrive in this increasingly competitive environment and seize new opportunities more systematically. With the proliferation of government departments, statutory agencies and even inter-agency committees, there is a danger that each of these pursues its own interests, and sub-optimises the national well-being.

However, it will not be realistic to undertake a massive restructuring of Government. Better we forge a clearer consensus of our national priorities and implement mechanisms to promote closer collaboration among our agencies. The establishment of the Singapore Cooperation Enterprise (SCE) to look into the export of public sector and governance expertise is a good start, but much more needs to be done to promote inter-agency coordination. The way we assess and reward our people must reflect these priorities.

In this regard, the Public Service should seek to promote a common understanding of the challenges confronting Singapore while identifying new opportunities for Singapore. The process should be just as important as the outcome. Rather than tinker at the edges, it should call for bold changes. Executed well, this effort should harness the collective energies of the public sector in repositioning Singapore in the New Asia.