'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.