Singapore’s Enduring Competitive Advantage
In the recently released
2013 World Economic Forum (WEF) Annual Global Competitiveness Report,
Switzerland retained its ranking as the world’s most competitive economy;
Singapore was No 2. What drives this competitiveness is that Singapore has
world-class infrastructure, with excellent roads, ports, and air transport
facilities, however all of these could be easily replicated. Hence, the
strongest driver which drives this competitiveness is Singapore’s nimbleness
and our ability to act on foresight and create new value.
Singapore is a small and open economy which is highly reliant on trade to drive her growth (with trade being more than 400% of her GDP) as she has a small internal consumption due to the relatively small population (compared to larger economies like China and USA). Yet, recently, she faces immense competition from emerging economies such as China and India who have labour and land abundance and are rich in raw materials, which gives them a comparative advantage in producing labour-intensive goods, such as textiles. Moreover, with the advances in technology brought about by globalisation, China and India are fast catching up in terms of infrastructure. One example would be the construction of bullet trains. Bullet train was first introduced in China in 2008, and since then, China's rail witnessed a boom of this fast way of transportation across the country. At the end of 2009, China's first high-speed rail line-Wuguang High-Speed Rail Line was put into use to link Guangzhou and Wuhan, marking another stage of China's rail system. This helps to significantly reduces the time taken to travel from one part of China to another, facilitating in the movement of people around China. Together, the new routes bring the country’s high-speed rail network to more than 10,000km, which acounts for more than half of the world’s total, as part of the government’s efforts during the past decade to stimulate the economy. Hence, this shows the government being more willing to spend on developmental projects that will enhance China’s international cost competitiveness and trade competitiveness, making China appear attractive as an investment hub through the increased marginal efficiency of investment in the country. Hence, luring in investors and increasing trade flows simultaneously.
Singapore is a small and open economy which is highly reliant on trade to drive her growth (with trade being more than 400% of her GDP) as she has a small internal consumption due to the relatively small population (compared to larger economies like China and USA). Yet, recently, she faces immense competition from emerging economies such as China and India who have labour and land abundance and are rich in raw materials, which gives them a comparative advantage in producing labour-intensive goods, such as textiles. Moreover, with the advances in technology brought about by globalisation, China and India are fast catching up in terms of infrastructure. One example would be the construction of bullet trains. Bullet train was first introduced in China in 2008, and since then, China's rail witnessed a boom of this fast way of transportation across the country. At the end of 2009, China's first high-speed rail line-Wuguang High-Speed Rail Line was put into use to link Guangzhou and Wuhan, marking another stage of China's rail system. This helps to significantly reduces the time taken to travel from one part of China to another, facilitating in the movement of people around China. Together, the new routes bring the country’s high-speed rail network to more than 10,000km, which acounts for more than half of the world’s total, as part of the government’s efforts during the past decade to stimulate the economy. Hence, this shows the government being more willing to spend on developmental projects that will enhance China’s international cost competitiveness and trade competitiveness, making China appear attractive as an investment hub through the increased marginal efficiency of investment in the country. Hence, luring in investors and increasing trade flows simultaneously.
In 2012, Singapore’s GDP
grew by a modest 1.3% (compared with 5.2% in the previous year). due to the
poor performance of its export oriented sectors of the economy amidst a
slowdown in global trade. Therefore, Singapore needs to constantly be on her
toes in order to enhance her own international competitiveness and export price
competitiveness especially at a time when these emerging countries are
catching up fast. An example of Singapore trying to enhance its attractiveness
in order to remain competitive is evident when Prime Minister Lee Hsien Loong
unveiled Project Jewel during the National Day Rally 2013, which is the plan to
redevelop T1 car park among Changi Airport’s key infrastructure projects to
grow capacity and strengthen its position as an international air hub.
Furthermore, Singapore constantly engages in Research and Development to
develop new comparative advantage in goods that are more income inelastic and
will not be in direct competition with emerging economies who can produce
manufactured goods at a lower price due to their labour abundance. Thus,
Singapore engages in R&D in new areas like Biomedical Science Manufacturing
which includes Pharmaceutical and Medical technology. In 2011, this relatively
young industry already contributed close to one quarter of the total
manufacturing value added. Singapore’s competitive advantages in the biomedical
sciences field are attracting considerable foreign investor interests and
spurring the growth of the biomedical sciences manufacturing, research and
commercial activities. Many of the pharmaceutical and medtech MNCs as well as
smaller biotech and medtech companies are anchoring their operations here and
using Singapore as a springboard into other Asian countries.
Hence, with such optimism
about the future conditions in Singapore’s economy, this would help to attract
various foreign investors into Singapore, from large countries such as the
United States and China. This will boost the aggregate demand of the economy,
bringing about actual growth and reducing demand-orientated unemployment.
Additionally, the increase in investment will increase the productive capacity
in the economy as investors bring with them new technology into Singapore,
thereby ensuring potential growth.
Singapore government has
invested billions of dollars to upgrading the workforce as it has recognised
that Singapore must deepen skills and expertise within every sector of her
economy. This allows the labour force to work smarter, not just harder. Thus,
Singapore government has increased it’s spendings on education and training to
improve it’s stock of human capital by spending S$2.5 billion on the Continuing
Education and Training (CET) Masterplan, (2010-2015) e.g NTUC Unit for Contract
and Casual workers which aims to assist Contract and Casual Workers to upgrade
their skills as well as helping them with career progression. By equipping
everyone with more skills, they can do higher quality jobs. The government can
also helped to speed up economic restructuring. Raising productivity, and
shifting to more efficient use of labour, land and energy will require changes
in our economic structure. It should instead provide the right price signals
(e.g. foreign worker levies) and enable market forces to reallocate scarce
resources to where they can be most productively used.
To ensure GDP growth,
Singapore has played an important role as a supporting country to the wider
world to achieve economic growth rather than just competing with other
countries. For example, Singapore has partnered with many global companies by
acting as the key base for global companies to grow and manage their pan-Asian
operations, and for Asian enterprises which are expanding internationally.
Reading Sources:
http://www.medtech.sg/singapores-economic-climate-competitive-advantages-in-the-biomedical-sciences/
