Singapore growth strategy till before the 1997 Asia Financial Crisis has been largely based on a export-led model powered by a wide collection of MNCs attracted to the favourable labour, taxation and intellectual property protection policies of the country. In some ways, this has largely been successful and lifted the GDP of the country to a level that is one of the highest in Asia.
Between 1997 till 2003, the country suffered from a series of external shocks eg Asian Financial Crisis, Dot-Com Bubble Burst, Sars. But what is more significant is the emergence of China during this period as the de-facto manufacturing base in the global supply chain. Most of the manufacturing industry that typically employed a large number of labour-intensive workers have started to relocate to the coastal areas of China seeking to lower their costs in production.The effect snowballed and a number the SME supplying to these MNC have also relocated in order to be closer to their customers. As the original model is based on MNC-led export growth, core R&D and manufacturing know-how is tightly controlled by these companies and not transferred down to the locals. During the boom days, MNCs provided good jobs at senior level that often provided good salary and perks, thus disincentivised risk-taking amongst locals to strike out on their own. The civil service is no help either as salaries are kept attractive relative to private sector to retain people. The GLCs as a whole are given the backing by the government to dominate the small local base but are clueless once outside the small island.
All good things come to an end. As MNCs packed their bags and left for cheaper locations, thousands of workers in the manufacturing industry are thrown out from their work. Quite a few of them have to be "retrained" to take up lower-paying service-related jobs. GLC like Chartered Semicon lost out in the fiercely competitive foundry business to their Taiwanese counterparts TSMC and UMC and was finally absorbed by IBM. This is despite the billions that were invested in Chartered by Temasek. ST Eng remained very much an organization reliant on contracts from the SAF to keep going. SCS has completely disappeared despite having a headstart over Infosys and the likes in the early eighties. Remember NatSteel used to have a OEM company called NatSteel Electronics that as sold to Solectron whilst Foxconn in Taiwan grew from a one-man shop to a fortune 500 company. The landscape of the tech-industry in Singappore is bleak and get only bleaker with each passing day.
Whereas if you look at the other two asia tigers Taiwan and Korea where they chose to be less reliant on MNCs led growth but instead help local local enterprises to developed core competencies while collaborating and at times competing with these MNCs. With these key competencies, they building fledging companies that blossom into fortune 500 companies. With years of accumulated experience in growing and competing in cut-throat industry, they are starting to turned to clean energy and biochem product development and manufacturing. I once talked to a Taiwanese businessman. I asked "The IT industry is getting commoditized. What is Taiwan going to do?". His reply as casual but comforting, "Taiwanese businessman are very sharp. As long as the government do not interfere, they will find their way out". Looking at the industry landscape now, I must say what he said is true. You will find Taiwanese less reliant on provided add-on components based on third-party technology but by providing more of the core technology previously provided by western MNCs. As an example, Mediatek has become one of the largest provider of mobile chip technology in the world. I bet they may have overtaken TI in this space and are second to Qualcomm. Not bad for a company that started out by providing a platform to built "black-market" phones in China!
Hence, there was the decision in 2004 to push ahead to built the two IRs to create more buzz to the local industry. No doubt their are benefits to what the IRs can bring, but what is created are low-wage paying service jobs. We do not yet know what the pernicious effects of having easily accessible casinos will have on our social fabic and work ethics, but IRs do not really provide us with a competitive edge in the sense that they can be easily replicated elsewhere. Imagine Korea has nurture a Samung and you try to replicate Samsung? Taiwan has nurture a TSMC and you try to replicate TSMC? You get the idea.
We have imported thousands of foreign workers in the last five years, not to help us to built world-class companies but more to provide cheap labour to our service industry. In general, wages for the bottom half of the population have stagnated over the last five years and jobs get more competitive with foreign workers vying for a piece of the cake.
If you look carefully as to what has happen after 1997, Singapore do not really have a growth path moving forward. The expansion of the economy through the creation of low-end service jobs powered by foreign workers cannot continue forever. What can we do next?
Afte spending billions of dollars to promote biotech and through organization like A-Star where scholarships up to PhD level are granted by the hundreds or even thousands, there is a lot of doubt that these will bear good fruits. In the most extreme case, these will turn out to be hugely costly experiment for the nation.
As such even with the coming elections, the PAP government have yet to be able to formulate a vision for Singapore for the next ten years. Perhaps, from the current lineup of their candidates, it may help to suggest that they too are running out of ideas.
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