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Singapore’s iconic Merlion statue harkens to the high-tech city’s fishing origins. (Edwin Koo/Edwin Koo for The Globe and Mail)
Singapore’s iconic Merlion statue harkens to the high-tech city’s fishing origins. (Edwin Koo/Edwin Koo for The Globe and Mail)

Canada Competes

How Singapore creates its economic miracles Add to ...

When Gregory Wade left Research In Motion’s Asia Pacific headquarters here last fall, the logical thing to do might have been to pack up his family and head home to his native shore of British Columbia.

Instead, the eight-year expat joined an equity firm and continued preaching the economic miracle of Singapore, coaching Canadian firms looking to set up shop in the region as a vice-president for The Canadian Chamber of Commerce in Singapore.

“You will sense a vibe of growth, of energy, a sense of entrepreneurship and the desire and interest to create new and innovative products and services,” said Mr. Wade, who is now managing director of mobility at InflexionPoint Acquisition Corp. “I didn’t get that same vibe in Canada, regardless of locale.”

For a city-state with no resources, limited land and a small population, creating the explosive growth and development of the past half-century has meant running it like a corporation – using highly trained, highly paid leaders, inviting the world’s best and brightest to its work force with an open-door policy, and with a near-zero tolerance for dissent among the masses.

The result is a planned, modern economy with efficient public services, an educated population and a per-capita share of gross domestic product of more than $60,000 (U.S.), the highest in Southeast Asia. Singapore ranks No. 2 on the World Economic Forum’s global competitiveness rankings.

Today, as Singapore nears the 50th anniversary of its independence, the original economic miracle is slowing. Hit hard by the Asian financial crisis, the dot-com bust, the outbreak of SARS in 2003 and then global recession in 2008, the city-state is at an economic turning point.

In its early days of enticing multinational firms, huge tax breaks, low operating costs and a great quality of life in an English-speaking tropical setting were the calling card. Today, a more sophisticated approach is needed, economists say, with a heavy focus on research and development, education and head-hunting the best talent from at home and abroad.

“Singapore’s economic strength is so vulnerable. When Europe stops, when America goes into recession, when Japan goes into recession and China slows down, there is nothing left for Singapore because we are so small, our economy is all exports,” said Tan Khee Giap, an economist from the National University of Singapore and co-director of the Asia Competitiveness Institute. “All we can do is diversify.”

At the core of Singapore’s economic policies is the country’s massive Research, Innovation and Enterprise Council, chaired by the Prime Minister himself and given an undisclosed share of the country’s annual budget to reach out to the four corners of the globe for investment.

Operating through three government ministries, four agencies and a multitude of smaller schools and research institutes, it is a massive multibillion-dollar effort to keep Singapore at the cutting edge of technology and research, and draws some of the world’s biggest corporations to its shores.

One of its lead agencies is the Economic Development Board, which pursues business opportunities around the globe from a gleaming downtown headquarters with a stunning view of Singapore’s skyline. The board manages 21 offices in 12 countries, including six in the United States, developing investments and industries that together contribute about 40 per cent of Singapore’s GDP.

“Our openness to investments started really in the 1960s because we found that the multinational corporations brought with them their own distribution networks and their own market. So it opened us to the rest of the world in terms of their exports,” said Damian Chan, the board’s international director for Americas, who said the focus has shifted over the years from lower-tech manufacturing to higher-tech, such as semiconductors and electronics, and now to more innovation and knowledge-based industries, including biomedical sciences and clean technology.

“The key thing now actually propelling the Singapore economy forward, and we will see that continue over the next two, three, maybe even more decades, would be the Asian growth story.”

With many of the world’s leading multinationals already setting up shop, research and development is the next major focus. In 2006, the government set aside more than $10.5-billion for R&D over five years, aiming to have it increase to 3 per cent of GDP. Today an estimated 1 per cent of the country’s expenditure on R&D is government-funded, with another 1.5 per cent backed by private industry.

Much of that has gone into a steel-and-glass planned development whose construction is still under way, buildings with fanciful science-fiction names like Biopolis and Fusionopolis, housing the research institutes of the Agency for Science, Technology and Research, or A-Star. Inside its labs and office towers, an estimated 5,000 researchers and other employees work in areas ranging from aerospace research to genomics, to developing a more effective razor for men. Here, a private multinational can access government-subsidized research labs for product development, technology transfer and marketing; some costs are recouped through joint projects and patent purchases.

In a major coup for Singapore’s R&D efforts, Procter & Gamble is installing a $97-million research lab here to develop new skin and hair care products mainly for the Asian market.

Other big names operate here, too: Dairy giant Danone researches advances in maternal and child nutrition. China’s Baidu has opened a research centre for language-processing technologies specializing in Southeast Asian languages. Pharmaceuticals company Roche is researching cancer and infectious disease treatments here, and wind technology company Vestas is establishing a global research and development centre.

Keeping Singapore’s economic miracle going, argues A-Star’s infocomm institute’s executive director Tan Geok Leng, is going to come down to cutting-edge, world-leading science.

“We think talent makes the big difference,” said Dr. Tan of the institute’s scholarship programs to send Singaporeans abroad for study, as well as efforts to attract international researchers. Their staff come from about 80 countries, and the institutes have drawn more than 60 companies from around the world.

However, nations looking to Singapore’s example might also heed the weaknesses in this planned economy as it matures.

At first sight, Singapore is a utopia of high-end shopping, clean streets and greenery. World-class restaurants accompany luxury hotels; even the street hawker stalls that dish out Singapore’s legendary melting-pot cuisine have been moved indoors into clean, modern surroundings. Its resort centre, Sentosa Island, draws an estimated 19 million visitors a year to its luxury hotels, water parks and Universal Studios theme park. A lovingly created botanical garden, city parks and the new $800-million first phase of the Gardens by the Bay parkland complex are all feeding Singapore’s reputation as the Monaco of Southeast Asia.

And expatriates have embraced the lifestyle: an English-speaking, safe and modern city in a tropical climate.

But there are cracks appearing in Singapore’s breakneck pace. Inflation in March sat at 3.5 per cent, a drop from earlier monthly averages that have hit 5 per cent and higher. By necessity reliant on the performance of its trade partners, weakness in the U.S. and Eurozone contributed to Singapore’s slowed GDP growth of 1.3 per cent in 2012, down from 5.2 per cent in 2011, and a contraction of 1.4 per cent in this year’s first quarter.

And for the first time, open political dissent erupted last year with the release of a white paper on population, which predicted Singapore’s population would have to expand from its present 5.3 million to 6.9 million by 2030 to sustain economic growth.

It was a breaking point, with housing prices already skyrocketing and public transit stretched under pressure from both increasing numbers of poorly paid migrant workers hired into manual labour jobs from places including mainland China and Indonesia, and at the other end of the scale, high-flying expats whose rich corporate packages are driving up the costs of housing and schools.

The government has responded to the dissent by tightening foreign labour quotas and increasing wage subsidies for companies that hire Singaporean nationals instead of expats. But it’s clear Singapore’s recipe for success over the past five decades is now in need of adjustment.

“There is clearly a huge dissonance between what Western observers think is happening in Singapore and what’s really happening on the ground,” said Linda Lim, a Singaporean economist at the University of Michigan who has been critical of the Singapore approach, arguing the government’s failure to allow industry growth to be more determined by market forces has left the country dominated by multinationals that have created a glass ceiling for the Singaporean nationals they employ, and open to extreme volatility from its economic dependence on trade.

“The bottom line is, competitiveness cannot be created out of thin air, competitiveness must be based on what you have and who you are,” she said. “You need to figure out what is different about you. There is no generic policy.”

Still, Canadians on the ground in Singapore say their resource-rich homeland can learn a few things from Singapore – the focus on bringing the best and brightest into government as well as industry, on recruiting from around the world, and on directing government dollars and programs to maximize the potential for innovative new industries.

“The intentions in Singapore are all very good but it’s their ability to implement those high ideals which I credit them for. … By default, this country should be not even a Third World nation but a fourth-world nation. At the turn of the century it was an opium den, a prostitution den and a gangland area. What they’ve done well is they have sought out the best and the brightest and recruited them into key leadership positions,” said Rohan Belliappa, executive director of the Canadian Chamber of Commerce in Singapore, which counts such iconic Canadian firms as Research In Motion, CAE and Bombardier among its membership.

He says he sees opportunities for Canada’s regions, including his native Atlantic Canada, to replicate some of Singapore’s efforts in areas including logistics management, financial services and the biosciences – all knowledge-based industries requiring few natural resources.

“They are continually looking for the growth opportunities. They don’t just follow the trends, they stay ahead, with best practices and investment improvement, on everything, even public relations and relations with neighbouring countries; they are friends with everyone in the region,” he said. “They’ve got the smartest people from the private [sector], the money from the public [sector], and build the nation on that basis.”

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