'Developed' Singapore wary of new status

'Developed' Singapore wary of new status

By Siti Rahil

SINGAPORE (Kyodo): Being labeled a developed country by the
Organization for Economic Cooperation and Development (OECD) from
Jan. 1 poses a new challenge for Singapore, which will
increasingly have to compete economically with western
industrialized countries.

With the exception of Brunei, an oil-based economy, Singapore
will be the first of the economically dynamic members of the
Association of Southeast Asian Nations (ASEAN), and also the
first of Asia's four newly industrializing economies, to be
elevated to that status.

"But we will not be popping champagne," Singaporean Prime
Minister Goh Chok Tong said recently. "For we are developed only
in per capita income terms. We are not yet a truly developed
country like Switzerland or the United States."

Singapore has been concerned about the prospect of tougher
economic competition in the race for foreign investment,
sandwiched between the low-cost, less-developed countries on the
one hand, and the mature, developed countries with their
sophisticated technology on the other.

"It is like being catapulted to play in the World Cup finals,"
Goh said, using a soccer analogy. "We will now have to compete
head on, not only with the low-cost developing countries that are
fast catching up, but also with the first league of developed
countries."

The OECD decided in 1992 to graduate Singapore along with the
Bahamas and four oil-rich countries (Brunei, Kuwait, Qatar and
the United Arab Emirates) from the status of developing countries
Jan. 1, 1996, and drop them from its Development Assistance
Committee list of eligible aid recipients.

OECD's decision is based largely on the island republic's per
capita income. Singapore is one of the world's richest countries
in this sense, with a per-capita income of 23,360 U.S. dollars in
1994, more than Italy, Britain, Australia and several other OECD
countries.

Singapore is not worried about the cessation of overseas
development assistance (ODA) flow to it from the developed
countries because its ODA share from these countries has been
shrinking in the last decade in line with its rapid economic
progress.

It received only US$22.3 million of ODA in 1993, most of it
from Japan in the form of technical cooperation projects. The
Japanese government stopped loan aid to the island republic as
far back as 1972 and ceased grant aid in 1988.

Plagued by a chronic shortage of land and labor, the city
state of three million people has in recent years given up on
labor-intensive industries, knowing that it cannot compete with
the less-developed countries in Asia that offer plenty of land
and cheap labor, and has instead focused on wooing high-tech
industries.

However, the competition for high-tech investments is also
fierce, especially at a time when countries such as the U.S.,
France and Britain are also hungry for such investment to ease
employment problems.

Singapore is fearful it cannot compete with these developed
countries because it is still lagging behind them in terms of
education, worker skills, productivity and technological know-
how.

Underlining Singapore's loss of competitiveness to less-
developed countries in labor-intensive industries, a recent
survey by the Nomura Research Institute showed that most midsize
Japanese companies prefer to set up operations in China, Vietnam
and other Asian countries where production costs are lower and
markets are growing more rapidly.

Companies operating in Singapore often complain of high wages
and a tendency among local employees to job-hop. Hiring foreign
workers is not easy because of government-imposed levies and
quotas.

Many companies based here have shifted their labor-intensive
operations elsewhere in the region. Last year, 9,400 workers
were retrenched partly due to such relocation.

Despite the high business costs, however, many foreign
companies still find Singapore an attractive place for investing
in high-tech industries because of its excellent infrastructure,
workers with better skills than in other Southeast Asian
countries, its strategic location in the Asia-Pacific region and
stable political climate.

According to Japan's Ministry of Finance, new Japanese
investment in Singapore rose to US$1.1 billion last year, nearly
double the US$644 million in 1993. Among ASEAN countries, only
Indonesia enjoyed more Japanese investment.

In its latest move, the government announced last month a plan
to develop a wafer-fabrication park to boost its competitiveness
in high-end semiconductor manufacturing amid a race among Asian
countries to attract high-tech manufacturing activities.

Haruo Nakayama, Nomura's managing director in Singapore, does
not think Singapore has to compete with the Western economies
because Japanese companies still need to invest in Singapore to
meet demands from the region.

In addition to high-tech investments, the government has also
been promoting Singapore as an international business hub for
multinational corporations to base their regional headquarters
for such activities as sales, servicing and research and
development.

The government is also trying to groom Singaporean companies
to invest in the region's newly emerging economies, particularly
in the form of joint ventures with Japanese and other foreign
multinational companies.

But its effort has been hampered by a lack of large local
companies -- the result of a lack of entrepreneurial spirit among
the populace after years of overdependence on Japanese and other
foreign multinational companies and also over-regulation.

As a result, most large-scale projects overseas, such as the
current joint effort with the Chinese government to develop an
industrial township in Suzhou, Jiangsu Province, and other
ventures in Vietnam, India and Indonesia, involve mainly
government-linked companies.

Singapore also has a shortage of professionals in the area of
research and development -- an important element to compete in
the big league -- and has had to import them from overseas.

Critics say creativity and entrepreneurship has been stifled
by too much emphasis on rote-learning and examinations at school.

The government is trying to change the situation in line with
Singapore's status as a developed country, but it is not
something that can be achieved overnight.