What Singapore Has Done Right.
- Kept the economy broad-based. Singapore always planned on a strong presence in manufacturing. It remains a major oil-refining and petrochemical-manufacturing center and a strong player in electronics, especially semiconductor foundry products and contract manufacturing of telecommunications equipment. Singapore is now positioning as a regional hub for pharmaceuticals and life sciences.
- Deregulated financial services. During the Asian Crisis, Singapore moved swiftly to ease rules in a bid to woo more foreign banks, insurance companies, asset-management corporations and venture-capital firms. A number of foreign banks were allowed a bigger retail presence. Singapore also reformed its securities industry, including the relaxation of listing rules for Internet and other technology start-ups.
- Accelerated telecommunications liberalization. When Hong Kong and Australia began to attract more regional telecom business, Singapore moved up its deregulation schedule. "We had set 2002 as [the starting] date, but we realized it was unrealistic so we decided to dismantle all the barriers from April 1 this year," says Yong Ying I, head of the Info-Communications Development Authority. "We needed to react quickly to the new environment and take advantage of the changes."
- Opened up other parts of the economy. Last week, Singapore said private companies can generate power and sell electricity to end users as early as April 2001. Foreign law firms have been granted virtually free rein. Health-services deregulation is allowing foreign medical practitioners to come and work in Singapore despite initial grumbles from the local medical association.
- Welcomed foreign talent. Two of the four top local banks, including industry leader DBS Bank, are now run by foreigners. So are the state-owned shipping company, NOL, and the biggest local electronics manufacturer, Chartered Semiconductor. "Most of my local and multinational clients tell me to find the best talent I can irrespective of nationality," says a headhunter. "In Hong Kong, many of our clients normally prefer a local person."
And What Else It Needs To Do.
- Fast-track the privatization of government-linked corporations. Singapore needs to sell down stakes in companies like DBS Bank, Singapore Telecom and Singapore Power. State entities tend to be overcautious and complacent. Government ownership can also hold back regional expansion. Singapore Telecom failed to buy Hong Kong's Cable & Wireless HKT in part because of the political implications of the Singapore government owning a Hong Kong utility.
- Dismantle laws that restrict entrepreneurship. Business people still find Singapore's environment stifling. Only recently has the government amended laws that allow homes to be legally used for business purposes. Regulations on land use and building controls are not as friendly as in Hong Kong and other business centers.
- Deregulate the media. There is only one major newspaper company, one TV network, one pay-TV operator and one radio network. Foreign shareholding in local media companies is limited to no more than 3%. Liberalization will help attract the foreign money and know-how Singapore must acquire if it is to become a serious player in the New Economy that is being built on the back of the Internet and other technological advances.
- Tackle other sacred cows. On average, Singaporeans put in the equivalent of 20% of their salary (and their employer 15%) into the state-managed Central Provident Fund. That is a lot of money tied up in an investment that yields below-market returns. And the government's easy access to this cheap money encourages misallocation of resources. The Housing Development Board is another institution in need of a shake-up. It builds cheap houses in a country where 95% of families already own homes. A more commercial approach to public housing, such as opening the sector to competition, is needed.
- Build a critical mass of research know-how. Singapore needs to do more to develop home-grown creativity. Strong funding for research centers help, but fostering academic freedom and the spirit of inquiry is equally important.
