Singapore struggling to find niche amid fierce competition
Singapore struggling to find niche amid fierce competition
Agence France-Presse, Singapore
After achieving First World status in just one generation, tiny
Singapore finds itself squeezed between western rivals and
emerging Asian players as it seeks to find a niche in a
globalized economy.
Boasting one of Asia's most modern infrastructures, top notch
education and health care systems and a highly regarded
bureaucracy, the 38-year-old nation appears capable of easily
withstanding increasing competition.
But pitted against emerging giants China and India and some
Southeast Asian rivals, the city-state is now hobbled by high
labor costs, a limited domestic market, an ageing population and
heavy reliance on foreign labor.
A regional economist here compared Singapore to a corporate
executive who has risen too fast and priced himself out of the
market.
"On the one hand, he faces competition from his contemporaries
and on the other, there are equally qualified younger executives
rising up the corporate ladder willing to take the job at a lower
salary," he said.
From the 1970s until the 1997 Asian financial crisis, business
boomed as Singapore transformed itself into a hub for the world's
top companies which took advantage of cheaper labor and an
excellent business environment.
Village huts gave way to gleaming skyscrapers and modern
factories replaced small stores. Singapore-made computer chips
and disk drives were in demand worldwide, and the island's
reputation as a manufacturing center grew.
But along with wealth came higher wages for engineers,
accountants, designers and other professionals as well as
production-line workers.
Land prices, home and office rentals and taxes rose.
In short, living standards and costs became more expensive, in
some areas approaching levels in the developed world. Meanwhile,
Singapore's neighbors began to boom as market reforms took root.
As countries like China and India started producing the same
goods and services at lower costs, they began siphoning off
foreign investments.
Companies migrated in droves, including some from Singapore.
For example, computer disk drive manufacturer Maxtor will
reduce its work force here once its plant in China is completed
in 2005. Its China plant will make entry-level disk drives, while
high-end production stays in Singapore.
Seagate has cut its Singapore work force from 25,000 to 9,000
in the last five years as it shifted lower-end disk drive
manufacturing also to China.
Competition in the top-end market has also sharpened as Asian
economic tigers like Taiwan and South Korea continue to innovate,
producing smaller and more powerful computer chips and other
high-value products.
Prime Minister Goh Chok Tong said Singapore is now at a
"crossroads" and must make a choice: remain burdened by labor
costs, or implement such reforms as bringing down wages and
social security benefits to stay in the race.
While globalization has benefited Singapore immensely, it can
also work against any country.
He said that when lower-cost players emerge, and Singapore is
not competitive, investments will flow to these places.
For every manufacturing worker in Singapore, a company can
hire 13 in China and 18 in India. For every accountant here, a
firm can employ two in Malaysia and six in Thailand, Goh said.
Deputy Prime Minister Tony Tan cited a survey showing that
labor costs in Singapore were already higher than those in the
United States and Australia.
If that is indeed the case, "we have a major economic
problem," Tan said.
Labor chief Lim Boon Heng said annual wages for Singapore
engineers, at US$80,854, are higher than in many developed
countries like Australia, France, the Netherlands and Britain
where salaries range from $55,500 to $77,429 a year.