Download Dynamic Competitive Advantage: The Case of Singapore

Dynamic Competitive Advantage: The Case of Singapore
The experience of Singapore is that a national vision or plan can be extremely valuable in
upgrading economic activity.
Singapore has gone through five distinct economic stages since independence in 1959. At that
time the country was characterised by industrial unrest, racial conflict, shortages of
educational facilities and housing, deterioration of the urban environment, high
unemployment and stagnation in entrepot-trade.
STAGE 1.
The first stage, from independence in 1959 to 1965, was based on industrialisation through
the attraction of manufacturing industry to Singapore. The initial emphasis was on importsubstitution in the expectation of the proposed Malaysian common market. The objectives of
the programme were to promote growth, to stabilise the labour situation and to provide an
alternative to entrepot trade.
STAGE 2
Separation from Malaysia brought this programme to an end. Singapore was faced with a loss
of its economic hinterland, a very small domestic market and the loss of 25% of GNP and
20% of employment as the British military presence was withdrawn. Gave new impetus to the
second stage with the shift to a labour-intensive export-oriented industrialisation strategy. It
was at this stage that an "interventionist" approach emerged as the government sought to
create an investment climate attractive to foreign firms. The process of transforming
indigenous commercial entrepreneurs into successful export firms was thought to be too slow
and uncertain.
Strong political, social and economic measures were introduced to create a favourable
investment climate and attract foreign MNEs.
Institutions were reorganised, tax incentives revised and expanded, development of industrial
estates accelerated, labour legislation introduced to improve industrial relations, the
educational system restructured to emphasise technical education, and industrial training
programmes expanded.
The timing of this move to industrialisation was fortunate. It coincided with rapid growth in
world trade and investment and the development of MNE dominated export platforms.
STAGE 3
When full employment was achieved in the early 1970s the third stage, the transition from a
low-skill, low value-added, labour-intensive economy to a high-value-added one, was
initiated.
Rapid growth made apparent strains in the economic structure (acute labour shortages,
declining productivity growth) and environment (rising protectionism). 1979 saw the launch
of the so-called "second industrial revolution" as the economy was upgraded into
sophisticated manufacturing and services.
To achieve this radical restructuring the government introduced a range of measures.
Restructuring was led by a 3-year wage-correction policy designed to phase out low skill,
labour-intensive activities. New fiscal incentives were introduced to encourage industries to
shift into technologically more sophisticated activities. R&D efforts were actively promoted.
Manpower development was accelerated through the expansion of existing educational
institutions and the setting up of new training centres.
However, the Singaporean economy moved into recession in 1985 with a negative growth
rate (-1.8%). This was soon corrected with the identification of new growth opportunities and
the introduction of remedial measures. Growth resumed with GDP growth rates of 9.4% in
1987, 11.2% in 1988 and 9.2% in 1989, being achieved.
By the end of the 1980s the Singapore economy had achieved a high level of development:

highly sophisticated infrastructure (transport, communications)

increasingly skilled labour force. Student enrolments at tertiary institutions doubled
between 1980 and 1990.

Singapore's engineering graduate output of 38 per 100,000 population is more than
that of West Germany (13), UK (19), France (23) and US (32).

Singapore's R&D expenditure exceeded S$640 in 1990 (1% of GDP) and is expected
to increase to 2% of GDP by 1995.

A S$2 billion R&D fund has been established to support the further development of
Singapore's scientific and technological capability.
STAGE 4
The next stage of Singapore's development builds upon emerging opportunities within the
Asia region. Intention is to establish the city-state as a key value-adding switching node in the
global strategies of international business i.e. it intends to position itself as a "business
architect" to provide an effective interface for businesses to expand into the region.
The formation of the SIJORI Growth Triangle is designed to harness the resources and
capabilities of Singapore, Malaysia's Johor and Indonesia's Riau islands and to pool their
complementary strengths.
Coupled with the twinning of business linkages with Hong Kong, expansion into China and
Vietnam and outward investment by Singaporean firms.
Singapore's Strategic Economic Plan SEP
Singapore's key assets are political and economic stability, harmonious industrial relations, a
flexible, pro-business environment, sophisticated infrastructure and a highly skilled labour
force.
Despite this the government has identified a number of areas where it wishes to further
upgrade. Eight economic thrusts have been formulated:
1 to 4 are designed to strengthen economic fundamentals;
5 and 6 seek to develop industry clusters and business niches;
7 and 8 attempt to enhance Singapore's economic resilience amidst uncertainties in the
international environment.
Singapore's Strategic Thrusts for the 1990s
Strategy
Programme
Coordinating
Agencies
Enhance human
resources
Implement international manpower
programme
EDB
Promote national
teamwork
Establish MTI Economic Panel
MTI
Develop
International
Orientation
Overseas work experience for
Singaporeans.
Promote Growth Triangle and regional
alliances.
Develop information infrastructure.
EDB
NCB
Creative innovative
climate
Review government rules.
NPB
Develop industry &
service clusters
Implement cluster-based development
plans.
Hold cluster workshops.
Improve employer-employee ties.
Improve labour supply and demand.
Cluster
agencies.
MOL
Redevelop domestic
industry
Set up multi-agency taskforce.
EDB/NPB
Maintain
international
competitiveness
Form competitiveness monitoring
groups.
Reduce vulnerability
Form scenario analysis group.
Encourage positive gov attitude towards
local firms.
Review institutional support for local
EDB
MTI
MTI
MTI
EDB
firms.
Identify and monitor medium and longterm economic performance indicators.
Encourage MNEs to set up home base in
Singapore.
EDB
MTI
Cluster
agencies
NCB: National Computer Board
EDB: Economic Development Board
NPB: National Productivity Board
MOL: Ministry of Labour
MTI: Ministry of Trade and Industry
Strategic Thrust 1: Enhancing Human Resources
Enhancement is multi-pronged, viz, accelerating the upgrading of the educational profile and
the retraining of the existing workforce; expansion of education and training programmes in
the tertiary institutions, tailored to the needs of business and industry; increasing the supply of
professional people, through selective immigration if necessary.
Strategic Thrust 2: Promoting National Teamwork
Measures to promote cooperation between government, business and labour. An Economic
Panel been created for consultation and discussion on major economic issues.
Sectoral conferences to identify needs and differences between sectors and to seek
cooperation between sectors.
Strategic Thrust 3: Becoming Internationally Oriented
Encouragement of specialist technology corridors and business parks (aviation park, maritime
park, medical park).
Developing networks-of-excellence in niche areas (finance and banking, petrochemicals,
health care, telecommunications and IT). Strategy based on hubbing to assemble resources
and expertise in Singapore.
Strategic Thrust 4: Creating an Environment Conducive to Innovation
Several measures taken including:

modification of training and education systems to encourage individuals to exercise
initiative;

review of government rules and regulations that hinder the adoption of innovative
ideas;

recognition of creativity, and innovative ideas through public commendations.
Strategic Thrust 5: Developing Manufacturing and Service Clusters
The size of Singapore means that it can support only a few world-class industries, primarily
in niche markets.
Track record of government in picking 'winners' has not been good. Current strategy is based
on the identification and development of industry clusters within which competitive niches
can evolve; largely through market forces. This is a form of "market-facilitation".
Industry clusters that have been selected for priority development include commodity trading,
shipping, precision engineering, electronics, information technology, petroleum and
petrochemicals, construction, heavy engineering, finance, insurance, general supporting
industries, tourism.
Clusters developed in consultation with industry and relevant government agencies. Cluster
development plans will focus on creating core capabilities (eg. natural advantages, created
competitive advantages and industry structure/ attributes).
Strategic Thrust 6: Spearheading Economic Redevelopment
The key industry clusters, together with the larger domestic services represent about 42% of
employment but contribute almost 72% to GDP.
Smaller domestic service enterprises (excluding government agencies) account for only 9% of
GDP but 39% of employment.
Several strategies have been proposed to accelerate the development of these laggards
(strategic alliances among local companies to exploit scale economies and gain synergies;
dissemination of information on market trends, benchmark data; study missions).
Strategic Thrust 7: Maintaining International Competitiveness
Improved indicators of short-term competitiveness and other indicators of medium and longterm competitiveness have been put in place.
Strategic Thrust 8: Reducing Vulnerability
Recognises the vulnerability of Singapore's small economy and its dependence on MNEs.
Two diversification measures to be implemented are to encourage MNEs to treat Singapore as
a home base, rather than just a profitable business location and; to accelerate the development
of Singapore's own world-class enterprises.
Several strategies to strengthen MNEs in Singapore focus on "home base" characteristics.
These strategies include:
promoting more sophisticated technical functions (engineering design, product development,
business development, R&D etc.).

promoting marketing functions for regional markets.

encouraging MNEs to identify with the "made in Singapore" label.

encouraging localisation of top management.

A development plan for Small and Medium Enterprises (SMEs) is already in place.