CNBC Business | Tiger, Tiger  Burning Bright?

Tiger, Tiger  Burning Bright?

It survived the 1997 Asian crisis, but can Singapore steer its way out of the current storm? Colin Brown reports

Barack Obama may have spent four of his childhood years in Indonesia but it is another South-East Asian country, neighbouring Singapore, that perhaps comes closest to sharing his subsequent political philosophy. It is a mindset most memorably articulated by his White House chief of staff Rahm Emanuel, speaking in the weeks before Obama was sworn in: “You don’t ever want a serious crisis to go to waste; it’s an opportunity to do important things that you would otherwise avoid.”

Time and time again since achieving independence in 1965, Singapore has pursued just such an opportunistic and proactive game-plan. Acting with the single-minded zeal of a corporate entrepreneur, the country’s leadership has responded to various perceived crises by reinventing Singapore’s entire business model to rapid and stunning effect. Even though it boasted one of the world’s signature airlines as well as the largest container port, Singapore foresaw the threat that Dubai, Shanghai and Kuala Lumpur posed to its aerospace and shipping prowess and became hell-bent on diversification. Such top-down interventions occurred even at times when the economy was happily humming along. 

Such prescience has propelled a tiny city-state, with a densely packed population of 4.8 million and few natural resources other than accumulated brainpower, to the forefront of the global pecking order. Right now, Singapore outranks the US in two prominent surveys that measure innovation and it is also routinely named the destination of choice for expatriates in other questionnaires despite a draconian reputation as “the fine city”. Evidently, economic dynamism and efficiency trumps all those on-the-spot fines for chewing gum, jaywalking, skateboarding, dancing in public and “unnatural sex”. 

“Overall, these trends suggest that absent concerted public sector efforts by the US and Europe to boost innovation and competitiveness, that this century will not be the Atlantic century but, rather, the Pacific century, or perhaps more accurately, the South-Eastern Asian century,” declared the authors of a February report by the Information Technology & Innovation Foundation, a Washington DC think-tank. For western economies to still believe they have a monopoly on talent is dangerous in a world where “many nations no longer compete principally on low costs, but... innovation and knowledge as they seek to create, grow and attract high value-added firms”.  

As an illustration of how Singapore can impact Europe, look at Barcelona. In August 2007, Spanish Prime Minister José Luis Rodríguez Zapatero proudly unveiled the Biomedical Research Park on the waterfront in the Olympic village. A shining example of Zapatero’s vision of a new knowledge-led Spain, a country that now boasts a Ministry of Science & Innovation, the Barcelona facility was looking to capitalise on America’s crisis in science funding to lure researchers back to Europe in the areas of embryonic stem cells, genetic sequencing, and the effects of environmental pollutants. 

Two years later and Barcelona’s ambitions are being squeezed from two sides at once. In the US, the Obama administration has just lifted an eight-year ban on federal funding of stem-cell research and announced a $10.4bn (€7.9bn) windfall next year for the National Institutes of Health. Meanwhile, Singapore, home already to the $286m (€217m) Biopolis complex, will see a new $700m (€530m) biotechnology facility built by Switzerland’s pharmaceutical giant Novartis by 2012. Despite the recession, the development budget for the Singapore’s Agency for Science, Research and Technology (A*STAR) programme in 2009 remains steadfast at $1.04bn (€790m). By comparison, Barcelona Park’s annual budget is €65m – miniscule when one considers that Singapore paid $6m in 2002 just to poach one scientist,  Dr Alan Coleman, the Edinburgh geneticist who made world headlines when his team cloned a sheep named Dolly in 1996. 

Mind-boggling investments, relative to its population size, are emblematic of Singapore’s scale of ambition. In just a single generation, Singapore has morphed from a fishing community into a gleaming cutting-edge “economic tiger” whose government reserves of about $300bn (€230bn) still allow plenty of financial headroom for bail-outs and stimulus measures. But whether European countries — and cities — can mimic that enviable transformation in their own quests for a sustainable new economic blueprint depends on exactly which lessons are learnt. In the current climate of uncertainty about economic cause-and-effects, even Singapore’s miracle makeover has been subject to some revisionist interpretations of late. 

Much of Singapore’s current success can be traced back to 1997. Not content with being a manufacturing base, the government seized on the Asian financial crisis as a chance to become the region’s pre-eminent business hub: taxes were cut; doors were flung open to highly skilled immigrants; and the broadband foundation for what is now easily the most wired country on the planet was laid.  

A few years later when the dot-com meltdown led to a slump in technology manufacturing, the country moved even further up the value chain. Resisting the temptation to relocate low-end electronic factories to southern China, it drew its workforce into lucrative new niches such as clean water technologies, bio-engineering and private banking for Asia’s newly wealthy.  

More recently, in an effort to be become less vulnerable to external business cycles, Singapore has trained some of its investment machinery on the digital media and entertainment sphere. Ignoring the inconvenient truth about Singapore’s repressive attitudes towards free speech, the city-state has latched on to the creative industries as one of the few safe harbours amid the financial storm.  

In contrast with the UK, whose Film Council is facing a €25m cut in lottery funding over the next five years, Singapore recently boosted its annual investment in its surging media sector by 37%. As much as S$250m (€127m) will be spent this year to sustain the growth momentum. This increased spending, which includes funding from the National Research Foundation to boost R&D in interactive digital media, as well as support for public service programming, is projected to support about 2,000 jobs when the projects come on stream in the coming year. 

Singapore is by no means alone in chasing this new sector. “Many global cities recognise the potential of the fast-growing media industry to drive growth for their economies and give their city a competitive edge,” acknowledges Dr Christopher Chia, CEO of Singapore’s Media Development Authority. “Indeed, despite the current global downturn, overall prospects of the entertainment and media industry remain good, with the growth of the middle-classes in India and China giving rise to a new generation of media consumers.” 

But Chia also feels Singapore has in-built advantages to exploit, not least being an English-speaking population, libraries, researchers, a solid intellectual property and legal framework and a growing pool of talent, film funds and subjects to explore. 

“By leveraging on our traditional strengths as a business-friendly, IT-savvy city with a well-educated workforce, we believe Singapore is in a good position to succeed. We are strategically located in one of the fastest growing regions of the world. From providing exotic locales to offering original, authentic, and inspiring ideas for historical and cultural-socio documentaries, Asia is slowly but surely gaining in the global consciousness. This is not surprising as the Asian region, steeped in history and heritage, presents a rich historical treasure trove of story ideas that appeal to the world. For example, in the last decade, 80% of documentary and factual content used to be dominated by the North American and European markets but this is now changing to approximately 60%. Sixteen of the world’s top satellite broadcasters including Discovery, National Geographic and BBC, have made Singapore their base.” 

The state-sponsored presence of so many foreign companies has inflamed local sentiment since immigrants and multinationals are seen as the principal beneficiaries of Singapore’s prosperity. The statistics appear to back up the complaint: an unusually low 41% of Singapore’s GDP goes to salaries and wages, but more than 50% goes to corporate profits, interest and dividends. 

Chia defends the courting of international companies — which in the case of digital media also include the likes of Electronic Arts, Ubisoft and Lucasfilm — as “helping to contribute creative buzz to our small country while providing training ground for local media talents.” 

He adds: “These international companies help to spark off immense collaboration opportunities for our local media companies and create invaluable synergies and dynamism to the industry as a whole, and this is crucial in sustaining an ecosystem comprising a highly-skilled workforce and investment value to Singapore. They also create a wide spectrum of job opportunities for Singaporeans, not only in the areas of broadcasting animation, games, film but also management positions. Hence, this leads to knowledge transfer and picking up of invaluable skill sets to our locals.”  

Even if this artificially induced media cluster does benefit Asia in the long run, there are those who feel that adding yet another sector to Singapore’s investment portfolio is symptomatic of “growth fetishism.” Leading the criticism has been Dr Linda Lim, Singaporean professor of strategy at the University of Michigan’s Ross School of Business, who says the pursuit of everything from life sciences and health care, to semiconductors, casino tourism and online games, will leave Singapore a jack of all hubs — but master of none.  

In a recent interview with Singapore’s The Straits Times, she questioned the wisdom of allowing the state to keep making big bets on a few capital-intensive, risky projects, as opposed to releasing money and talent to local entrepreneurs to create value in smaller but nimbler enterprises. “It’s much better to send out 100 motorboats, rather than one huge aircraft carrier, into the unknown. I would bet on at least some of the motorboats making it, instead of the aircraft carrier, a sitting duck, which could get blown up.”  

Of course, given Singapore’s dependency on exports, it is not clear whether a large armada of local entrepreneurs could dodge the recent downturn any better than their big brother of a government. The same global tide that raises all boats in a supply chain economy, can also become a tsunami that threatens to engulf them all in a diversified recession. For evidence, look out today at Singapore’s storied harbour where hundreds of idling vessels lie anchored waiting for those  non-existent payloads. Only time will tell whether Singapore’s ship will come in again.