As a hub for global business and trade, Singapore has built up considerable hardware over the last five decades. It now needs to nurture the ‘heartware’ for its next phase of existence.
SINGAPORE (Aug 26): As Singapore turns 54, it is time once again to look at how far the tiny nation state has come. It has a history spanning centuries, beginning with Sang Nila Utama, a Palembang prince said to have founded Singapura on the island of Temasek in the 13th century; to Sir Thomas Stamford Raffles, who arrived in 1819 and established Singapore as a British trade outpost; migrant settlers such as Tan Tock Seng, who came with nothing but became successful businessmen and gave back to their communities; and visionaries such as the late prime minister Lee Kuan Yew, who led Singapore to international recognition.
Singapore today is the most advanced economy in the region, politically stable and one of the world’s richest, having benefitted from favourable trade winds over the last 200 years. But after decades of remarkable progress, the city state is now facing an existential challenge: Economic growth has slowed to nearly zero, amid an ageing population, industry disruption and an increasingly complex, competitive and protectionist world. Singapore’s struggle now, says observers, is to remain relevant in the global economy.
Singapore cannot be complacent, cautions DBS senior economist Irvin Seah. “The price of that is that we will start to lose our relevance, and that will mark the decline of the country. The only way Singapore can remain what it is is to continue to move forward and move forward faster than our peers,” he says.
Political observer Eugene Tan, a former nominated Member of Parliament and also law lecturer at the Singapore Management University, says: “We are much better resourced than we were in 1965, but maintaining our relevance must remain an all-consuming imperative.”
Yet, just what does “relevance” entail? Singapore has established itself as the place to conduct international business and transactions, and continues to gun for a slice of global trade and industry. The economic planners have wooed — with tax incentives and other perks, such as the facilitation of permits — MNCs to set up headquarters and factories here. In 2018, foreign direct investment in Singapore amounted to US$77 billion ($106.5 billion), up 24% from the US$62 billion in 2017.
Since independence, residents have been able to rely on the leadership to identify and formulate the key drivers of growth, typically external-oriented, given the size and nature of the economy.
Those plans were then executed flawlessly. The chosen sector will be the country’s focus for at least the next decade, commanding funds and resources, including tertiary education courses designed to produce the desired labour force. Over the decades, these industries have spanned petrochemicals, semiconductor manufacturing, biotechnology and, most recently, deep tech.
But that is becoming harder to do today, given the constant disruption and innovation, as well as shorter business cycles; by the time a young person finishes a four-year university course, the job market may be a very different one than what he or she had been preparing for.
“Too often the ideas have a top-down approach and, very often, a reflex action of seeking the government to take the lead and be the pathfinder,” says Tan. “That is fine, but it does have the consequence of a slower response to a fast-changing environment and a ‘one size fits all’ approach.”
Indeed, what is needed may be less of a top-down approach and for Singapore to wean itself off its reliance on external drivers of growth. There must be more space for home-grown ideas and talent to flourish. “We don’t want it to be a case of policymakers telling business people what to do, where to invest in and how things will turn out,” says CIMB economist Song Seng Wun.
Passion made possible
Observers whom The Edge Singapore spoke to were split on whether Singapore on its own has the bold and novel ideas needed for its economy to continue growing.
To be sure, there is a somewhat vibrant start-up scene, giving rise to household names such as Carousell, Chope and NinjaVan, and younger ones such as multi-currency wallet YouTrip and healthy food delivery service Grain. While that in some way shows there is no lack of ideas, some argue there is a lack of the risk-taking necessary for true innovation and entrepreneurship.
The way Murdoch University political analyst Terence Lee sees it, there has been a dearth of truly successful home-grown, entrepreneurial ideas. “It has been many years since someone like Sim Wong Hoo of Creative Technologies emerged from Singapore,” Lee says.
Song believes, however, that is not necessary for a big idea to come from within. “There are enough passionate people. But it doesn’t have to be a big, bold idea that shakes the world. It can be something that creates the opportunity to generate business from here.”
Song points to UK-based Dyson’s setting up shop in Singapore to work on electric vehicles, and how Apple tested its laptop production line in Ang Mo Kio before scaling up overseas. “Whether you’re a start-up from China or Indonesia, if you think there’s some benefit to being in Singapore, you bring that idea here,” says Song. Such enterprises in turn create local jobs.
Selena Ling, OCBC economist, says: “The key to remaining competitive is to stay open to ideas, talent and investments.”
SMU’s Tan says, however, that Singapore should not be only a passive respondent to global forces and trends. While he is cognisant that a small nation such as the city state is likely to have little global clout, he argues that it should nonetheless be relevant “on our own terms”. For instance, instead of emphasising how it can transfer economic knowledge to China and invest in the country, Singapore can be a cipher of and for China. “As China develops, the ability of Singapore to contribute to China will lessen. If we continue to emphasise our role and relevance by virtue of being the biggest economic investor in China, we will probably not be able to sustain it,” he says.
Relevance the Singapore way
Singapore may have a sterling reputation, having scored international acclaim for its advanced, efficient and ordered society. But the “Made in Singapore” label is not held in similar regard internationally, says Tan. As such, he suggests Singapore nurture national champions and export their expertise, such as in high-end manufacturing.
DBS’s Seah says Singapore’s focus on growth engines in previous decades has resulted in a workforce that is a Jack of all trades but master of none, and it was time the city state deepened its capabilities in certain sectors. Deeper capabilities will also be able to attract innovation to Singapore, such as when companies need extremely skilled engineers.
“Like precision engineering,” Seah says. “It is an old industry, but if you can master precision engineering to global standards or become a global leader, it lets you develop competitive advantage in aerospace robotics and high-end electronics.”
This need for local enterprise to internationalise has been discussed for years, but gained little traction. Seah says “it is now or never” because of ageing issues and emerging global trade protectionism. “We can’t be complacent and rely solely on MNCs to manufacture products and create jobs.”
Still, Seah says what will drive Singapore’s growth in the future may still not necessarily be created within the country. “Singapore’s growth impetus or momentum will be driven by external economies and our hinterland, the Asean region.”
Faizal Yahya, who researches globalisation and synergies across Asia at the Institute of Policy Studies, says: “Our Asean cousins are experiencing more growth and development [than Singapore], and this is likely to continue. We could take lessons and examples from the region as we move forward into the future. And as our neighbours’ economies become stronger, this might help us understand how to complement them.”
Perspiration versus inspiration
Pioneering Singaporeans have been lauded for their guts and can-do spirit that have helped build the foundation for today’s prosperity. The worry today is that that very progress has dampened the drive to succeed. CIMB’s Song muses:
“It’s only when you struggle that you have the drive to think outside the box and do something or go abroad. Are we losing that?”
Seah points out that Singapore’s pioneers were gutsy because they had to survive. The generation after was more cautious, and guarded the early success. Young Singaporeans today have a different outlook, he says. “They dare to dream. They dare to take chances, and they can afford to fail”.
Indeed, for Singapore to be truly innovative and thus remain relevant, its people need to be able to accept that failure is part and parcel of transforming the economy.
Song notes that the government is showing greater flexibility when it comes to innovation in the economy. Pointing to the way the government has been dealing with fintech and blockchain technology, he says: “We didn’t say it is illegal. We just put a warning on it, see how things develop along the way, see if it creates opportunities.”
Ultimately, Singapore has reached a different stage of development, which calls for a distinctly separate approach for sustainable growth. Says Song: “It’s about ‘we’ve got to this stage, how do we stay ahead of it?’ We know the policymakers are asking this as well.” However, much attention is still given over to remaining relevant to global business, he adds.
Perhaps what is needed, as SMU’s Tan says, is for Singapore to be able to “strike the right balance between industriousness and ingenuity.”
In the following pages, home-grown entrepreneurs tell The Edge Singapore about the less conventional tracks they have taken in pursuit of their passions.
- Small bakery business finds success after revamping to suit local tastes
- Powering the future with a reliable and renewable energy source
- Trio turn dorm-based beer-brewing business into legitimate operation; dream of opening microbrewery
- Solar power company NEFIN to raise US$150 mil and return to Singapore roots
- Disabled community needs your empathy, not sympathy, says advocate Ken Chua
- Hopes, dreams and social policies
