As Singapore approaches the 50th anniversary of its independence, its reputation as an English-speaking bastion of efficiency and transparency on the doorstep of the world’s fastest growing middle class is well established. Most global corporate executives are aware of the country’s favourable geographic location and stable economic, legal and political environment even if they haven’t flown through Changi Airport or witnessed Marina Bay Sands’ nightly laser light show.
It’s not a surprise then, that this compact city-state of 5.5 million people with negligible natural resources punches above its weight when it comes to attracting overseas investment: more multinational corporations (MNCs) have anchored their regional operations in Singapore than any other Asian city. This is attributable in part to the Garden City’s impressive physical and regulatory infrastructure. Its high quality of life, reliable intellectual property protection and competitive tax regime all engender confidence among MNCs looking for investment opportunities. As Yen Yen Tan, Regional Vice President and Managing Director, SAS South Asia Pacific, puts it, “the Singapore brand equals trust”.
While Singapore is undoubtedly an attractive hub thanks to its location, political stability and world-class infrastructure, the government’s willingness to engage with and support business has also played a large role in its success. In particular, the Economic Development Board provides incentives and tax breaks to attract MNCs in high value-added industries including pharmaceuticals, petrochemicals and technology.
Jonathan Asherson OBE, Rolls-Royce Regional Director ASEAN & Pacific, who has worked closely with the Singapore government for almost 20 years in addition to serving on the country’s Economic Development Board (EDB) for five years, explains: “The EDB is a one-stop shop for MNCs in Singapore. Their support for our technology acquisition and research and development activity influenced our decision to invest and embed capability here. Joydeep Goswami, President of Asia Pacific and Japan for Life Sciences Solutions, Thermo Fisher Scientific, agrees: “The EDB made the decision to do business here even easier by providing attractive tax incentives. They made it very clear that they are willing to work with companies.” In time, the presence of MNCs and the full cadre of professional support services has created an ecosystem that is able to continually attract new players. Asherson concludes: “If you’re in the right sectors and the right industries, it’s a great base.”
Business leaders from across the industrial spectrum had the chance to reflect on the roots of Singapore’s success in late March 2015 as the nation bid farewell to her first prime minister, the influential statesman Lee Kuan Yew. Lee is almost exclusively credited with guiding this small city-state on its path from humble post-colonial trading port to economic powerhouse. Victor Mills, Chief Executive of the Singapore International Chamber of Commerce noted: “The greatest achievement of Lee Kuan Yew was the realisation that Singapore had to survive without him. He created strong institutions that were equipped to evolve as the economy developed.” Lee’s vision and leadership yielded impressive results. The World Bank’s Doing Business 2015 report recently ranked Singapore as the easiest place in the world to do business for the ninth consecutive year.
Even so, doing business in Singapore is not without its challenges. For one, in 2015, the Economist Intelligence Unit named Singapore the world’s most expensive city to live in for the second year running and the price tag on talent, office space and corporate entertainment reflects that reality. Finding candidates with the experience companies need to grow and internationalise is difficult everywhere but competition for talent here is especially fierce, given Singapore’s impossibly low unemployment rate, aging population and restrictions on the flow of highly skilled foreign workers. An additional challenge regional managers might face is helping local hires, who tend to have more experience working in hierarchical reporting structures, to succeed in a matrix environment.
In addition, Singapore’s workforce is hungry for new opportunities and career advancement, which can augment attrition rates. Rajkumar Narayanan, President of Allergan Asia Pacific (a $23 billion diversified global pharmaceutical company) explains: “Human capital is at a premium in Asia and our employees expect more in terms of tangible development programmes and mentoring.” Joydeep Goswami agrees: “The cost of talent is high and rising. To address the retention challenge we try to offer people a clear career path with the opportunity to aspire to regional and global roles.”
Rajkumar Narayanan points out another challenge confronting regional managers in Singapore: “While the opportunity for growth exists in this part of the world, it’s not something that can be mined very easily.” Nilesh Patel, Senior Vice President and President, Asia Pacific for Avon concurs and notes that while the consumer base in Asia is large and household income levels have improved, there are still a large number of poor people in these markets without a social safety net who have experienced a lot of economic volatility. “When their income levels rise, they tend to save, so the transition to a middle class with lots of disposable income is happening more slowly than many believe,” he says.
In addition to overestimating how quickly growth can be translated into revenue, Patel adds: “Global executives also tend to underestimate our local competitors in Asia. They work on a completely different model, have lower margins and have strong, established relationships in the market.”
Finally, the region’s economic volatility can make accurate financial forecasting difficult. Narayanan concludes: “The big challenge on all of these fronts is to communicate the differences between APAC and the company’s other markets in a transparent, open and constructive manner that doesn’t come across as defensive.” What’s the bottom line for companies considering Singapore as a regional base of operations? Most of the management challenges MNCs are facing here also exist in other cities around the region, but Singapore’s most desirable qualities are traits to which most of its neighbours are still aspiring. Cost is an issue but Jonathan Asherson notes that the Singapore government is working on creative ways to partner with regional neighbours to help companies outsource manufacturing capability, for example, to jurisdictions with lower labour costs. Yen Yen Tan adds that the government’s ambition to be the world’s first Smart Nation, with info-comm technology wired into every aspect of its infrastructure, and its emphasis on innovation and creative problem solving will keep the country relevant and attractive to business for decades to come. Overall, the consensus seems to be that Singapore’s offering is compelling enough to justify the premium it commands.
Joydeep Goswami echoes the sentiments of many regional presidents in saying: “We have been very happy in Singapore and plan to continue increasing our presence here. My prediction is that Singapore will continue to do very well.” Victor Mills shares this optimism for the country’s continued economic success: “Singapore will continue to be a thought leader for the region because it’s a tremendous success story and a tremendous place to do business.”
Reflecting on everything Lee Kuan Yew and his team accomplished in the first 50 years of Singapore’s existence, Jonathan Asherson observes: “They achieved more than 100-fold GDP growth with only mud and humans to work with. That’s not easy.” Given Singapore’s intelligent long-term economic strategy, impressive track record for efficiency and laser-like focus on increasing productivity, it is well placed to maintain momentum for its next 50 years and beyond. Arwen Joyce is a Singapore-based journalist specialising in business and travel
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