Media Division, Ministry of Information and The Arts, 36th Storey, PSA Building, 460 Alexandra Road, Singapore 119963. Tel: 3757794/5
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SPEECH BY DR TONY TAN KENG YAM, DEPUTY PRIME MINISTER AND MINISTER FOR DEFENCE, AT THE SOCIETY OF INTERNATIONAL BUSINESS FELLOWS LUNCH HELD ON THURSDAY, 10 APRIL 1997 AT 12.15PM AT RAFFLES HOTEL
Let me first warmly welcome all of you to Singapore. I understand that most of you are visiting Singapore for the first time.
I would therefore like to take this opportunity to share with you some insights about Singapore and its business role in the Asia-Pacific region.
SINGAPORE'S ECONOMIC DEVELOPMENT
Since independence over 30 years ago, Singapore has managed to carve out a role for itself in the world economic system. We have made significant progress in our efforts to industrialise and build up our manufacturing and services sectors. In the process, we have been able to generate healthy profits for Singapore-based companies and to raise the standard of living for our population.
Singapore's success is due to our establishing a pro-business environment. We opened our doors to Foreign Direct Investment (FDI) at a time when it was not the conventional wisdom to do so. In the 1960s, many developing countries were suspicious of foreign investors. We however realised that FDI was the best way to obtain the production technology, management expertise and business experience which we sorely lacked. In addition, MNCs provided the access to large export markets in the US, Japan and Europe.
To attract business, we built up a physical infrastructure which is amongst the best in the world. We actively developed industrial land and buildings and co-ordinated the rapid expansion of all related services like utilities and communications. We also created adequate housing near factories to facilitate greater labour mobility and flexibility. Through the efforts of our Economic Development Board, we put in place the requisite business infrastructure and systems needed to facilitate the industrialisation process.
To help create a hospitable climate for investment, we pursued monetary stability and fiscal prudence while offering various fiscal incentives to potential investors. At the same time, special attention was given to put in place a comprehensive and transparent legal and corporate framework to further provide security for investors in Singapore.
Finally and most important, we emphasized human resource development. We stressed strong basic education and on-the-job skills training to meet the manpower needs of a rapidly expanding economy.
In addition, we spared no efforts to supplement the dearth of managerial expertise at that time by opening our doors to qualified talent from overseas.
This has been, and will continue to be, a cornerstone of our human resource development strategy.
The above strategies have served Singapore well. Over the period 1980-96, net investment commitments have risen by over 11% per annum and trade by close to 9% per annum. As a result, our economy has been able to grow at close to 8% per annum. From an almost unknown enclave in the Pacific some 30 years ago, Singapore has become one of the top global centres for doing business. Business executives surveyed found Singapore ideal for siting their corporate and operation headquarters, R&D as well as manufacturing facilities due to our openness, transparent business rules and attractive tax incentives.
The healthy growth in the last decade is a reflection of our success in upgrading and restructuring the economy. We recognised that we could no longer rely on low value-added manufacturing given the emergence of other lower cost developing economies in the region. We needed to focus on higher value-added manufacturing activities commensurate with a higher cost but more efficient and sophisticated workforce. Only then could we continue to remain attractive and offer value-for-money to potential investors in a global marketplace that is becoming increasingly competitive and borderless.
In manufacturing, for example, we have gone heavily into electronics and other forms of high tech manufacturing. In 1980, electronics and related segments contributed only 20% of manufacturing value added (VA) and 17% of exports. Today, electronics accounts for close to 46% of manufacturing VA and 57% of our exports. Singapore now contributes about 45% of the total global output of hard disk drives.
Foreign investor confidence has remained strong throughout the last decade. Currently, about 4000 large foreign manufacturing companies have operations in Singapore. Many of them have headquarters status, allowing them to switch from using Singapore as a base for low-cost production to high-tech R&D. Take Compaq, for instance. Started in the 80s, it began its operations in Singapore manufacturing printed circuit board assemblies (PCBAs). Today, it designs and manufactures notebooks. Compaq is just one of the many examples of big US companies which have upgraded their operations over the years and done well.
However, we recognize that to support these manufacturing activities, a strong gamut of business services ranging from insurance, banking and advertising is a crucial facilitating factor. We have therefore actively attracted well established service providers, some of whom are seated amongst us today, like Arthur Andersen and ABN Amro, to site their operations here.
Economic Opportunities In A Booming Asia
Singapore's prosperity did not occur in isolation. We have benefited from Asia's rapid economic expansion. Over 1990-96, East Asia grew 8.6% p.a., more than 4 times the growth in other industrialised economies. The growing Asian markets have allowed us to export more goods and services to sustain our growth momentum.
More importantly, future prospects for Asia remain bright.
Between now and 2005, the World Bank expects the economies in East Asia and the Pacific to expand by 8% per annum, nearly 3 times more than the growth of the other industrialised countries
This will give rise to many trade and investments opportunities in the region. In 1995, foreign direct investment (FDI) flows into Asia alone was US$ 65 billion or 21% of world-wide FDI flows. Barring unforeseen circumstances, returns on these investments will continue to be robust. US companies are amongst those that have capitalised on Asian countries' hunger for foreign capital and invested profitably in the region. In 1995, the stock of US direct investments in Asia (excluding Japan) totalled US $56 billion with returns over the period 1980-95 averaging 27%.
This was more than double the 13% earned in Europe or 12 % in Latin America.
Singapore's Value-Adding Role
Against this backdrop of a booming Asia, advances in information technology and communications, as well as the liberalisation of markets have changed the modus operandi of doing business. The value-added chain of producing goods and services is becoming increasingly unbundled . No longer do producers need to site factories in locations where large consumer markets are. Investors can now distribute their operations throughout Asia to exploit and optimise on the comparative advantages that each country offers.
Within this global business framework of today, Singapore continues to play a useful value-adding role for companies operating in Asia because of specific strengths we have built up over the years.
Let me highlight these factors.
First, we have a put in place a world class infrastructure to support business needs. This includes our comprehensive air, sea and telecommunications links with the region and the rest of the world; as well as an efficient domestic logistics system. For example, Changi Airport has over 3000 weekly scheduled flights to over 130 cities in 56 countries. We recognise that in an era of shortening product cycles, time-to-market is becoming increasingly crucial for producers. Our business infrastructure aims to facilitate a seamless transfer of products from the factory floor to consumer markets.
Second, our skilled and disciplined labour force has provided high-tech manufacturing and services companies the manpower needed to develop high value-added activities here in Asia. Our workers allow producers to undertake R&D and innovation quickly to customise their products to meet the tastes and needs of regional consumers. In this regard, I am glad that our workforce has consistently met industry expectations, evidenced by our number one ranking by the Business Environment Risk Intelligence (BERI) since 1980.
Third, we have developed an extensive commercial and trading network in Asia. Strategically positioned between North and South Asia, Singapore offers an added southern linkage, namely ASEAN to investors. Our companies have first-hand operating knowledge in most Asian markets. We are ranked amongst the top 10 investors in Malaysia, Indonesia, Thailand, China and Vietnam. We also have over 170 overseas offices and missions in these emerging markets. Singapore thus offers investors the added flexibility of diversifying their export markets to the entire Asian region.
Fourth, companies in Singapore can concentrate on their commercial interests without worrying about political instability. Stable labour relations resulting from a close tripartite working relationship between government, management and labour have served us well over the years. Since 1986, there have been no industrial stoppages or strikes in Singapore.
Finally, companies can be assured of maximum flexibility and freedom to pursue their business interests. We are committed to the free market system and philosophy. We keep bureaucracy and regulations to a minimum.
Our goal is to facilitate business growth, not restrain it. Fortune Magazine in its issue of November 13, 1995 ranked Singapore as the best place in the world to do business.
HOW SINGAPORE CAN BE OF VALUE TO US COMPANIES
Asia's economic renaissance, cast against a backdrop of continued global liberalisation, presents new growth opportunities for US companies.
Singapore can help you integrate into this Asian prosperity.
Being a multicultural Asian society, we are attuned to the consumption patterns and preferences in regional markets. We can act as a suitable regional base and test-bed to launch your product ideas into the wider Asia-Pacific market. An example of how a US company has benefited from using Singapore as a regional headquarters for its R&D activities is Motorola. Singapore's proximity to the Asian market has allowed Motorola to customise their pagers according to the individual needs of regional consumers and be the first to market them.
Singapore can also act as a "Partnership Centre" to bring together strategic alliances between companies from the US and Singapore to invest in East Asia. With our familiarity of regional regulatory and market conditions, coupled with our warm relations with governments in Asia, Singapore can help to reduce the risks of US companies who are venturing into these new unfamiliar markets for the first time.
Finally, we can offer US companies a convenient foothold in regional markets through the industrial parks built and managed by Singapore.
Six of such parks currently exist in China, Vietnam, Indonesia and India.
Each Industrial Park already has an impressive list of private sector market leaders in the consortiums. In China, for example, the involvement of big US names like Harris Semiconductor, Eli Lilly and Advanced Micro Devices in the Singapore-Suzhou Industrial Park attest to their faith and trust in the success of the project.
To operationalise these ideas of bilateral economic co-operation and to expand further commercial linkages between our two countries, the Singapore-US Business Council was formed in 1996 to foster greater understanding between our two nations and facilitate more business tie-ups.
A "Singapore-Inc." website was launched concurrently in the US and Singapore just a month ago. This site serves as a central information source for US businessmen and investors on Singapore.
In conclusion, let me add that the US security presence in Asia has provided a valuable blanket of stability while the strong commercial presence of the US has also been a key contributing factor for economic development in the Asian region as a whole. Asia's economic renaissance is an immense opportunity for US companies, for greater business expansion, collaboration and development.
Singapore is well poised to help US companies realise your plans to expand into the booming Asian markets. We can be a strategic value-adding partner to prospective US companies. I warmly invite all of you to explore and embark on a mutually beneficial joint partnership with Singapore to turn the vast opportunities in Asia to profits.
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