Prof' Dr' Zafar U' Ahmed

1

Presentation 25 Singapore Inc.,

• By
• Prof. Dr. Zafar U. Ahmed
• President and CEO
• Academy for Global Business Advancement Inc.,
• Texas AM University at Commerce,
• Commerce, Texas, USA

2
Thought Starter

• We have become rich in one generation - a miracle
  perhaps - but too quickly and hence not
  deep-rooted enough. Will we decline in the next
  generation???
• - Former Prime Minister Goh Chok Tong

3
Introduction

• After 40 years of remarkable growth,
• Singapore had gone from a per capita income of
  US427 in 1960 to one of US20,748 in 2006

4
Positioning Statement

• Because of the hostile historical heritage,
  Singapore had to leapfrog its neighbors as
  trading partners and attract foreign companies to
  manufacture in Singapore for export back to the
  developed world
• Singapore sought to define itself as a First
  World Oasis in a Third World Region.

5
How to Achieve the Positioning Strategy By 2020?

• By investing in and promoting new science and
  technology clusters, Singapore planned to move
  its economy up the value chain toward
  knowledge-based sectors

6
Country Background

• Located 1? north of the equator between the tip
  of Malaysia and the islands of Indonesia
• It is slightly smaller than New York City
• Three main ethnicities
• Chinese (76.5)
• Malay (13.8)
• Indian (8)
• Languages Spoken
• English
• Mandarin
• Malay
• Tamil

7
Colony of Republic

• During WWII, the British surrendered Singapore to
  the Japanese in February of 1942
• The colony suffered greatly under harsh Japanese
  rule
• Residents died from malnutrition and disease or
  were executed
• Singapore joined with Malaya, Sarawak, and North
  Borneo to form the Federation of Malaysia in
  September 1963
• Political tensions were acted out on the streets
  of Singapore in a series of riots between Malay
  and Chinese ethnic groups
• On August 9, 1965, Singapore became an
  independent nation

8
Early Years of Republic

• Educated in law at Cambridge University in
  England, Lee Kuan Yew, the Finance Minister,
  founded PAP (Peoples Action Party) in 1954
• Lee is credited by many as the designer of
  Singapore Inc., and served as the worlds
  longest-running prime minister ever, from 1954 to
  1990
• We inherited the island without its hinterland,
  a heart without a body.
• - Lee Kuan Yew

9
Early Years of Republic

• The government headed by Lee prioritized its most
  pressing needs
• 1st. Secure its independence by strengthening its
  defenses and gaining international recognition
  with a seat in the UN
• 2nd. The economy
• In an effort to create jobs and to secure its
  political standing, the PAP set up the Housing
  Development Board (HDB) in 1960
• Within its first 18 months of operation, the HDB
  built enough housing to accommodate 30,000 people
• Public housing has become the norm in Singapore
  by 2001, over 85 of the population lived in HDB-
  affiliated housing (the highest housing ownership
  in the world)

10
Political System

• The president is elected directly as the
  constitutional head of state
• Advised by the prime minister, the president also
  appoints the cabinet from the parliament

11
Control

• Under the new legislation, the government would
  regulate wages through the National Wage Council
  and employers would be given greater freedom over
  hiring and firing
• From anti-spitting campaigns in the early 1960s
  to a ban on the sale of chewing gum, the
  City-State maintains tight control over the
  social and physical environment of the island

12
Anticorruption

• If we believe that we are immune to it
  (corruption), we are really risking our future.
  It is a worldwide disease and especially and
  endemic in Asia, and we can easily be stricken by
  it. Only constant vigilance has kept it down
• - Former Prime Minister Goh

13
Anticorruption Strategy

• Ranked number five out of 100 on the 2006
  Transparency International Corruption Perceptions
  Index, the authoritarian Singapore government was
  renowned for its honesty and transparency
• According to the CPIB (Corrupt Practices
  Investigation Board), any person found guilty of
  corruption could be fined up to S100,000
  (US54,000), imprisoned for five years, or both
• Making corruption even less tempting, Singaporean
  government officials salaries were higher than
  those of most other countries in the world
• Prime Ministers Salary in 2006 was a little more
  than
• US1.5 million
• His most junior minister earned approximately
  US550,000

14
External Relations

• ASEAN
• In an effort to promote regional trade and
  stability, Singapore joined with Thailand,
  Malaysia, Indonesia, and the Philippines to form
  The Association of Southeast Asian Nations
  (ASEAN) in 1967
• Singapore upset many of ASEANs members by
  pursuing its own bilateral trade agreements with
  the US, Japan, New Zealand, Australia, and Mexico
• ASEAN also provided a forum for resolving
  regional disputes
• Singaporean Industrial Parks Across ASEAN, as a
  Case in Point

15
External Relations

• China, As a Partner
• Our biggest challenge is to secure a niche for
  ourselves as China swamps the world with her high
  quality cheaper products.
• - Former Prime Minister Goh
• Like the rest of the world in 2006, Singapore
  looked to China as both its next great market
  opportunity and a considerable threat
• Singapore hopes to leverage its unique
  administrative skills and infrastructure
  knowledge in a partnership with China to
  industrialize Singapore
• Graduating 500,000 engineers in 2006, China could
  provide Singapore with valuable human capital
• Industrial Park in China, as a Case in Point

16
External Relations

• India, as a Partner
• Indian as a President
• Indian as a Deputy Prime Minister
• Industrial Park in India, as a Case in Point

17
Economic Growth

• Singapore maintains tight control over its
  economy while concentrating on six policies
• Investment in the state
• Active encouragement of Foreign Direct Investment
• Pro-business Environment
• Free Trade
• A Tight Monetary Policy
• High Savings (44, the highest in the world)

18
Government-Linked Companies

• Because of its weak private sector in its
  post-interdependence days, Singapore established
  government linked companies and statutory boards
  to provide infrastructure necessary to improve
  living conditions and to make the country
  attractive to foreign direct investment.
• Examples
• Public Utilities Board (Essential Utilities)
• Development Bank of Singapore (Banking)
• Port of Singapore Authority (PSA -- Port
  Operations)
• Jurong Town Corporation (Construction)
• Housing Development Board (Public Housing)
• Singapore Airlines (Airline)
• Singapore Technologies (High Tech Industries)
• Singapore Telecom (Telecom Industries)

19
Government-Linked Companies

• A government owned firm did not mean, it was
  dependent on the government for its survival,
• Rather, it was run like any other business,
  keeping the goal of the greatest return on
  investment in mind
• It was managed by technocrats, not bureaucrats
• Singapores successful government-linked company,
  Singapore International Airlines (SIA) grew from
  a small regional airline to one of the worlds
  leading passenger carriers
• PSA Corporation, as a Case in Point, is the top
  operator of seaports across the world

20
Foreign Direct Investment

• With no capital of its own in the 1960s, the
  Singaporean government saw the importance of
  foreign direct investment as one route to growth
• By the end of 206, cumulative foreign direct
  investment into Singapore stood at US 200
  billion

21
Foreign Direct Investment

• Tax Incentives
• In 1967, the government had the first Economic
  Expansion Incentives Act passed to attract
  manufacturing firms by providing tax relief
• Pioneer status, tax exemption for a period of
  five to ten years, was given to both start-up
  companies and MNCs making significant investments
  in Singapore
• 1970 - Manufacturing
• 1980 - Financial service firms and technology
• 1990 - Tax incentives

22
Foreign Direct Investment

• Educated Labor
• Achieving a GDP growth rate of 13.6 in 1968,
  Singapores economy continued to grow throughout
  the 1970s, 1980s and 1990s.
• The prime objective of the vision was to develop
  Singapore into a modern industrial economy based
  on science, technology, skills and knowledge
• The government attempted to discourage low-cost
  industries by raising wage levels while
  increasing the skill base of the worker
  population
• By 1988, Singapore was growing again at a rate of
  11.3, the highest economic growth rate in the
  world

23
Pro-Business Mind-Set

• Labor
• Not only meeting its customers present needs,
  the government strived to anticipate future needs
  by preparing the infrastructure and educating
  workers years in advance
• Even the labor union, or National Trade Congress
  (NTUC), was a partner of business
• The unions realized that much of what is good for
  business is also good for the workers

24
Pro-Trade Mind-Set

• Free Trade
• The government viewed the port as its lifeline,
  devoting as much capital to augment the
  facilities as it could afford. The result was a
  perpetual state of expansion and upgrading
• Originally serving as an entrepórt for regional,
  trade, Singapore became a major global hub as its
  industries grew
• Trade served as a key engine of growth
• Singapores trade volume was two to three times
  its GDP, one of the highest ratios in the world
• Government set up the International Enterprise
  Singapore in 1983 to promote the export of goods
  from Singapore and establish it as a major
  international trading hub
• Singapore in 2007 is the number one busiest
  container port in the world

25
Pro-Trade Mind-Set

• Free Trade
• TradeNet, the first e-trade processing system,
  was launched in 1989 by the Trade Development
  Board
• Early in the 21st century, Singapore remained
  highly dependent upon the external environment,
  with total trade making up 277 of its GDP in
  2006
• Singapores second-largest trading partner is the
  United States
• In 2006, 22.3 of all nonoil exports went to the
  United States

26
Pro-Trade Mind-Set

• Monetary Policy
• Complementing Singapores effort to provide a
  stable environment for investment, MAS (Monetary
  Authority of Singapore) was created by an act of
  Parliament in 1970
• Main objective was to regulate all elements of
  monetary, banking and financial aspects of
  Singapore
• Although restrictions on lending and trading of
  the Singapore dollar existed as part of MASs
  currency controls, some restrictions were relaxed
  in 2006 to help boost the financial sector and
  increase capital flows

27
Pro-Business Mind-Set

• High Savings
• The Central Provident Fund (CPF), as a publicly
  managed, mandatory savings program, served to
  provide social security for Singaporeans
• Upon retirement, Singaporeans receive tax-exempt
  benefits on the basis of past contributions plus
  interest
• Members could only begin making retirement
  withdrawals at the age of 55, while setting aside
  a minimum sum to provide for basic needs
• Originally, the CPF was set up as a worker
  retirement plan requiring only a 10 total
  contribution
• In 1968 the contribution was raised to 13 and
  Singaporeans could use their CPF savings to buy
  their HDB flats
• In 2007, it is 20 matched by 20 by the
  government (making it 40).

28
Pro-Business Mind-Set

• High Savings
• In 2006, members could invest 100 of their
  account into low-risk, professionally managed
  products, including Singapore government bonds,
  unit trusts, and fixed deposits
• 35 of investable savings, however, could be
  invested into stocks on the Singapore Exchange
• CPF funds for the most part remained low-risk
  investments
• In December 2001, S89 billion of the CPFs total
  S92 billion was invested in Singapore government
  bonds
• With 2.92 million members at the end of 2006,
  Singapore had one of the highest domestic savings
  rates in the world - 46 of GDP

29
Enterprise Ecosystem

• As we continue striving to overcome new
  challenges, EDB will endeavor to do even better
  to entrench Singapore as a compelling hub for
  business and investment. The linchpin of our new
  approach rests on building a vibrant enterprise
  ecosystem - a total environment bringing together
  companies big and small, foreign and local,
  thriving in synergy and symbiosis
• - Teo Ming Kian, Chairman, EDB

30
Enterprise Ecosystem

• Realizing that it could no longer compete on cost
  alone in the ever-competitive global marketplace,
  Singapore focused on further diversifying its
  economy and moving toward a knowledge-based
  economy.
• We want to encourage innovation and
  entrepreneurship throughout the economy, well do
  this by investing in our human capital,
  technology and infrastructure we have a national
  mindset
• Chua Taik Him, EDBs Managing Director
• To prove what he means he created the Technology
  Investment Fund, which invests in promising
  private companies, co-invests in Singapore based
  ventures and in home grown ventures

31
Biomedical Sciences - The Next Big Thing?

• To build on Singapores competitive advantage of
  its infrastructure, intellectual property laws,
  and health-care system, the government set aside
  S1 billion to transform Singapore into a
  biopolis of Asia
• The EBD Biomedical Services Group was organized
  to assist companies in planning, investment and
  marketing of Singapore biomedical sector

32
Biomedical Sciences - The Next Big Thing?

• Infrastructure
• As it had done earlier in chemicals and
  electronics, Singapore invested in building the
  infrastructure necessary for the research and
  manufacturing needs of BMS companies
• Located near the National University of Singapore
  and National University Hospital, Biopolis
  expects to meet the residential and research
  needs of 2,000 scientists and professionals
• After initially setting the goal of housing 15
  life-science manufacturing firms by 2010,
  Singapore has already attracted more than half,
  including Merck, Pfizer, and Wyeth to its shores

33
Biomedical Sciences - The Next Big Thing?

• Intellectual Capital
• If Singapores enterprise ecosystem strategy were
  to have a chance of success, Singapores
  education system would have to fully foster and
  support it
• The government has made significant investments
  in promoting new ways to teach while encouraging
  innovation with scholarships and awards
• To strengthen its higher education the EDB has
  planned to attract at least 10 world-class
  education institutions by 2008.
• By 2003, schools including INSEAD, John Hopkins,
  Wharton, and MIT had already set up satellite
  campuses or educational ventures in Singapore

34
Biomedical Sciences - The Next Big Thing?

• Bioinvestments
• Established in 1991, the National Science and
  Technology Board (NSTB) had as its primary
  mission to raise the level of science and
  technology in Singapore.
• The NSTB later renamed the Agency for Science,
  Technology and Research (ASTAR), built
  Singapores scientific knowledge base through a
  series of 5 year plans
• The ASTAR governs 4 divisions
• Biomedical Research Council (BMRC)
• Science and Engineering Research Council (SERC)
• Exploit Technology Pvt. Ltd. (ETPL)
• Corporate Planning and Administration Division
  (CPAD)

35
In Conclusion

• You can change taxes, you can change policies
  quickly, but if you want to change mind-sets,
  promote entrepreneurship or innovation, or cause
  people to be less risk averse, those are not the
  changes you can cause overnight.
• - Former Prime Minister Goh