Where to Singapore?

[DevG]

Here's an article from Reuters. Anyone with a crystal ball and opinions?

China may spell end for Hong Kong and Singapore
(Reuters)

15 March 2002 by Ovais Subhani

  Could a burgeoning China drive Singapore and Hong Kong the way of
the dinosaur? Some economists fear the answer could be yes.
China's emergence as a manufacturing powerhouse spells competition for
every Asian economy, but none face a more compelling need to shape up
for the challenge than the two city economies.
Each has got a different response strategy -- while Singapore
scrambles to reshape itself, Hong Kong is betting on the status quo.

While most Asian nations can look within -- to seek growth in domestic
consumption -- if their export engines start to sputter, the
relatively small populations of Hong Kong and Singapore give them
little choice but to look outside for growth.

Hong Kong ranked ninth and Singapore 15th among the world's top
exporters in 2000, according to the WTO, leaving each just a narrow
space to expand export growth.

To address the shortcoming each is taking a different tack.

While Hong Kong is betting on geography, being well placed to plug in
to the Chinese growth engine, Singapore is gearing up to become a more
services- and knowledge-driven economy and reduce the impact of
manufacturing cycles.

SHANGHAI THREAT

But the clock is ticking. Regional analysts said within 10 years the
emerging industrial, port and commercial hubs inside China may not
leave the rivals much to fight over.

"The debate over the rivalry between Hong Kong and Singapore
has...become a side issue, in the sense that you are pretty much
fighting for the spoils rather than the real thing," said Paul Alapat,
Nomura International's economist in Hong Kong.

"It's inevitable. China has such a huge trained labour force and it's
still cheap, it's going to be virtually impossible to compete."

Low-cost Shanghai offers the most immediate and direct competitive
threat. It threatens to soon deprive Hong Kong of much of
China-related air and shipping traffic.

In the future, many multinational firms now operating out of Hong Kong
and Singapore could move their regional headquarters there, along with
a large share of investments and financial and manufacturing
activities.

Last year, Shanghai's gross domestic product grew 10.2 percent, while
Hong Kong saw growth of just 0.1 percent and Singapore's GDP shrank
two percent.

FADING AWAY VIABILITY

International financial adviser Marc Faber, dubbed "Dr Doom" for his
often gloomy views, said the viability of financial services centres
such as Hong Kong and Singapore would fade as cheaper or virtually
free communications allow investors to trade from their location of
choice.

"In future, there won't be a global financial centre," he said. "The
institutions can be anywhere they want to be. You won't have to be in
a financial centre any more."

Faber, who predicted in 1990 that Shanghai would emerge as a major
market, said more mainland cities have the same potential.

"Hong Kong or Singapore, over time they will become relatively
unimportant because in China there would be at least 10 cities that
have economies the size of Hong Kong," he said.

Andy Xie, chief economist of Morgan Stanley Dean Witter, said China's
challenge to Hong Kong and Singapore could lead to a decline in living
standards.

"The issue is whether any plan can shield you from Chinese competition
and hence preserve the living standard. I think the truth is somewhere
in between," he said.

Xie said investors may be willing to pay a premium for the developed
infrastructure, tax incentives and business-friendly legal environment
of Hong Kong and Singapore. But the size of that premium depends on
how much they restructure their economies.

SEARCH FOR GROWTH

Alapat said both would have to seek new growth engines as
manufacturing, for Singapore, and property, for Hong Kong, may not
remain such effective growth drivers as before. "Most of the easy
solutions are now behind us."

Alapat said Hong Kong may be feeling the competitive pressure from
China much more intensely at the moment.

But Alapat and Xie both agreed that its proximity to China and North
Asia would remain its biggest edge over Singapore.

"Hong Kong doesn't need to restructure to the same extent as
Singapore," Xie said.

He said Hong Kong could continue to be a centre for China's Pearl
River delta -- a very large economy of 80 million people with exports
already above $100 billion dollars and growing.

BRIDGE THE DISADVANTAGE

Singapore, despite being cheaper than Hong Kong, still has to figure
out the level at which investors would think its relative geographic
disadvantage has been bridged.

Sanjeev Sanyal, Deutsche Bank's regional economist, said Singapore was
encouraging local companies to tap into growth outside the citystate.

More than half of the earnings of telecoms giant SingTel are already
generated overseas.

Singapore wants to encourage knowledge-based industries like
biotechnology, so the emphasis would be on incentives like low
personal income tax, Sanyal said.

"Given their track record one has to give them the benefit of the
doubt that they will do it again. But having said that, when you make
a one-directional bet and if it goes wrong, it goes wrong big time,"
he said.

[want_to_believe]

I'm not to worried about the status of singapore. Have several customers in China and been there many times, so i know a little bit about the manufacturing there. At the moment, most companies (  we as well , next year ) porducing there low end seies of products in china. Yes, it is cheap, but a lot of qualety issues and basicly zero skilled workforce. There is no way at the moment to produce high tech products in China . Maybe , in the future , but then, production cost will rise as well. And you still dont have the infrastructure, the workforce or the stable government like in singapore.

[want_to_believe]

I think we maybe underestimate one fact in the IT Industrie...a fact what will have a big impact on Singapore as well. Quality of living. We should not forget that there is a worldwide shortage of IT Professionals. In this busienss, you are more or less free to choose where you want to work. Living in Singapore is very attractive due to low taxes, safety, food , nightlive and the international lifestile. I don't know a single IT professional who wants to work in China when he has an offer in US, Singapore or France.

[kes]

I actually made a proposal to an aquaintance of mine in the EDB regarding the future of Singapore.

I suggested that ASEAN work as a bloc of nations in a metanational style.  Each country in ASEAN specializes in a different part of an economy.  This might boost the region's chances of survival.  However, like in the EU where there are countries lagging behind in terms of standard of living etc.  the problem with ASEAN is that there are countries where there is a lack of governance.  

I still think this is a good idea that ASEAN should consider for the future.

[New Guy]

Interesting thread.

I've been giving this a lot of thought myself recently and I believe that we are now witnessing Singapore at its peak. Before I read the first article in the thread I had concluded for myself that a long decline is now possible for Singapore. The thoughts I had went as follows

1. Singapore grew initially as a base of for cheap manufacturing. It has now priced itself out of this market.

2. They thrived as a trading hub, being middle men for the whole region. That was back when Asia was still intimidating and mysterious for Western companies. The language and the culture in Singapore seemed more familiar. With the growth of globalization, the proliferation of English in the region and the internet, the demand for "middle men" is falling fast.

3. I think the comments above re financial services are accurate, every back bedroom will be a trading site soon enough.

4. Innovation. I believe that PhilM has a point. The cushy lifestyle and, perhaps more importantly, the stifling of free thought here has crushed the potential for competitive growth in software innovation and R & D. India leads the developing nations in these fields and I don't think it is a coincidence that one of the most chaotic societies in the region is also producing the free-est of thinkers. You know they are desperate in this area when the Straits Times runs a front page article declaring the government is now launching a collective initiative to encourage indivduality. (George Orwell is smiling somewhere).

5. Competition from China. W-t-b I believe your views on Chinese labor are lagging a few years. Semi conductor manufacturing is flocking to China. This means two things, firstly, if the Chinese can do this, then they can manufacture just about anything. Secondly, even if this is pioneer stuff, it will quickly encourage the development of a highly capable labor pool and supporting infrastructure that will draw in other businesses that traditionally might have looked at a place like Singapore.

6. Lastly, can Singapore create a new base of wealth with it's own overseas investments? I have spent a lot of time in China recently and it appears to me that the Singaporeans are being outdone there by the Taiwanese. The Singaporeans seem to be almost Westernized in their business approaches and I have not met many that have been successful there without support from their Government. The Taiwanese, on the other hand, are making a killing. I fear the Sinagpreans have become too "Westernized" for immediate success in China.

7. Last but not least, The Old Man. I think it will be dangerous to underestimate the impact of the passing of Lee Kwan Yew. Truly a unique indivdual, few countries would not feel the negative effect of a man of his capabilities leaving the next generation to cope with the biggest challenges Singapore has ever faced.

I take no pleasure from saying it, but I too am not optimistic for the future of this lovely island.

[makanaka]

Most interesting thread.

I don't know China at all as well as some of you do, but recall a Chinese ministry within the last couple of months being quoted as saying that China's unemployment rate would increase by an astounding 30 per cent per year for the next few years because of reforms related to China's entry into WTO.

My guess is that the huge pool of surplus labour is coming and will come from the agricultural sector. That is going to create all sorts of social tension, which will only be added to by the unrest in China's western provinces.

And as always, a rising standard of living on the eastern seaboard, compared with a brittle social security net in the agricultural economies of the interior will not help matters. Even where the rich coastal provinces are concerned, the usual social path is for demands of more political freedom to accompany rising personal wealth.

I wonder how the Party will see all this through.

[nosy]

Everytime I go to China, I am surprised by the number of new buildings and developments. The country is really changing. With the Olympics coming up there is also a sense of excitement in the air. The Chinese people are welcoming this change.

China will be a very different place in a few years. Already the MNCs and consulting firms are all trying to get as big a piece of pie as possible.

As for singapore, it has been at a stand still if not going backwards for the past 3-5 years. The current recession saw a number of smaller companies in particular in the IT industry close shop.

Many companies are getting their IT resources from India at a very low price. Remote IT development is in at the moment. The next country to take over the IT market with its cheap labour costs is China.

China not only provides cheap labour and costs, it is also a big market in itself. This is exactly what Singapore is lacking for these MNCs. The market is small, yet costs are high.

I see a lot of potential in China and of course you can already see many countries becoming nervous because of this. In particular the US and Singapore. And when China becomes an economic giant and takes off, it will have no mercy on others.

Get in or get left behind. I see it as a big (a very big) opportunity.

[This message has been edited by nosy (edited 20-03-2002).]

[want_to_believe]

Why are Companies moving to china ...because  of the cheap labor , no question. Manufacturing companies are like grasshoppers, they moving around the world and manufacture where it is cheap. Years ago, Europe companies are moved to east Europe ...now they moving onwards to china ..lets see what's next, maybe Africa. A good example is Ireland. 5 years ago, nearly every technical or service phone center and welcome center moved to Ireland . Low taxes and Eu support. Walking to Dublin was like passing the who is who of the IT world. You can tipple your salary with in one night at a bar, getting 6 different job offers. Now , 5 years later , the taxes are higher, the salaries are higher, and everybody is leaving. There will be a china boom in manufacturing , I agree , but lets how the production cost is affected by this. I'm going to Shanghai several times a year and I would say  living there is already more expensive than in Singapore. Don't know about the rent for an apartment , but restaurants and shopping is easily 20 % more expensive than Sing. OK, some things like KFC are cheaper .

[cs]

PhilM

You have rather harsh words for the current generation of Singaporeans. Which is probably not surprising since you probably see only what officaldom sees abt Singaporeans.

The current prolonged economic recession is having a restructuring effect that is at this time not at all well documented and  understood. For the first time in Singapore's history, we are experiencing record unemployment at the tertiary level. While at one time, a degree was seen as a passport to a good life, there is now the stark realisation that even if you get a degree, there is a high chance you will have no job and no future in Singapore. And for those who do get a job, the pay packet is pitifully small.  

So what do you expect Singaporeans to do?

Stupidly sit still and hope for the best?

Because of the economic adversity, many have started to consider options they would have not thought of before.

And I am not talking abt Singapore grads becoming cleaners or flipping hamburgers at MacDonald's.

At the recent biz fairs organised by the ST, there were record numbers that showed up to find out more abt starting a biz. Where previously everyone only wanted to work in Singapore and moan abt FT coming here to steal jobs, now everyone is mailing their CV's overseas in hopes of becoming a FT themselves. Just ask any kid on NUS or NTU. Chances are they will be able to tell you everything abt H1B's, Australia's Skilled Migration Program etc. Even parents have wised up. While previously NUS/NTU was the preferred campus of choice, now everyone is planning on sending their kids overseas so that they can work overseas after graduation and get experience. I remember there was recently a high profile tiff involving a parent that wanted to send their child to an international school as opposed to a Singapore school. This move was violently opposed by MOE who feared that if a precedent was set, everyone would pull their kids out and put them into international schools so that they can be better prepared for an education overseas.  

So I am inclined to see the brighter side of things. At the end of the day, Singapore might become just another city of 4 million. Given Singapore's constraints, it pretty unrealistic to have ambitions of eventually becoming anything else. However a lot more Singaporeans will be overseas enjoying the best the world has to offer. And many more will become business owners rather than workers for life.

That is what I see in my crystal ball.

And I am happy with what I see.

[This message has been edited by cs (edited 20-03-2002).]

[rubber ducky]

Just out of curiousity, when we talk about singapore going down, are we talking about Afghanistan kind of poverty, or are we talking about a more moderate suburban kind of life without 500 000 dollar mercedes and multimillion dollar apartments? Be tough to handle the former, but hey, a bit of back to the basics isn't neccessarily a bad thing right? i still remember being there in the early 80s where the oceans still had fish, people lived on ubin and there was an attap hut in front of me house, and it was really not that bad. sure, there wasn't starbucks and borders, but then, we knew everyone living on the street by name, the neighbors were friendly enough to drop off some curry for dinner and the kopi-tiam uncle always knew your order. Kids walked down the street carrying lanterns during the mooncake festival and trick or treated during halloween. singapore still had that nice friendly laid back small town feel. that wasn't so bad was it? sometimes, i think singapore has become a little too over developed in the last 10 years.

[antoine]

See the number of posts
See the number of opinions
This is what difference means.

Everyone saying something about the same thing, which even if not true at first glance is certainly believable.

Thats is how it should be, we cannot all see the same thing, be the same thing, even if we are in the same place...

Many lessons to be learnt from this post.
The world could be a better place and we just go to China help, and come back, eh!
Go to that country help and come back, that is my Utopia...I try to live it too, good to indulge for a while.

It could be a better world.

Peace

[cs]

This reminds me of an interesting story. Don't know whether you heard it. It was not reported in the Singapore press.

DPM Lee was at one of the local universities. He was trying to instill a sense of pride of being Singaporean into the students. So he used the following example.

He asked the students to imagine flying home. As we approach Singapore and you see the cityscape from the air, don't you get a sense of pride. Don't you get a sense of happiness and achievement.

All was silent.

Then one brave undergrad got up to speak. He told DPM that went DPM comes back to Singapore, he comes back as one of leaders of Singapore. When he looks out the plane window, the pride, happiness and achievement he feels is akin to a master craftsman admiring his work. Everywhere he looks, he can see his hand in the masterpiece.

When an average Singaporean comes home, he does not get this feeling. When he looks out the window, there is no ownership or pride. This is because unlike the the master craftsman, he is but a small elf polishing a small wheel.

DPM had no reply and the Q&A ended.

If you take a close look at Singaporeans, you will find that at the heart of it we are a pragmatic people. While the mastercraftsmen might bemoan that Singapore is no longer #1 in SE Asia, the little elves don't really care. When push comes to shove, we will either find wheels elsewhere to polish or set up a shop selling polishing equipment.  

[This message has been edited by cs (edited 20-03-2002).]

[T2K]

CS,

Interesting story, and I thought your last sentence was both funny and insightful.

However, knowing Singaporeans' inherent shyness and extreme respect for authority, I find it had to believe the story happened as told.  And the PAP never seems to be speechless or unable to respond.

Anyway, that doesn't matter.  It may well have actually happened.  The little elves part is classic.  Thanks for relating that.

[cs]

T2K

It actually did. It was at NUS. The first part was briefly mentioned in the media but the second part was omitted.

In any case you are stereotyping if you think all Singaporeans are shy and afraid of authority.  

[This message has been edited by cs (edited 20-03-2002).]

[crank]

PhilM, find yr views interesting. While Chinese do indeed has the memory of an elephant, dont forget they hv this concept of face too. All the promises wrt HK were not made just to let it go down the hill. In fact, that wld be a great sign of failure to the Chinese leaders. Hence, while they really do not hv a real solution to all the deflation and structural problems, they just gotta try. Dont forget abt the breakaway Taiwan. Who wants to return to the motherland if revenge is part of the reward?
So at least HK has got somebody to worry over the country.

Singapore, not so lucky. The problems with Sporeans are as numerous as mentioned by many others here. Even more. Hey, since I am stuck here for the time being, I'll not depress myself with all the negatives abt the place, the government policies and the people. Boo hoo!