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Singapore remains a model for neighbours
Singapore’s transformation from a
third world city state to one of the world’s wealthiest metropolis
has involved constant renewal and the forging of new goals.
Back in the 1960s and 1970s when it was an outpost of Britain’s
military power – this accounted for almost 20% of the national
economy – unemployment remained an issue as was the danger of
racial conflict and an ongoing tussle with communism.
The early experiment as a social democratic nation fostered by the
founding prime minister, Lee Kuan Yew, saw the nation’s planning
underpinned by three key prongs of its economy – trade, services
and industry.
Pioneering what became a developmental model for many third world
nations, Singapore showed the benefits of nation building based on
one’s strengths.
But there are few countries that could effectively imitate the
Singapore role of active government participation in leading
sectors of the economy.
The Trade Development Board worked hard to ensure Singapore’s
rapidly growing entrepot trading, funnelling produce from
neighbouring countries to the rest of the world and creating the
hub for locally manufactured products to be exported globally.
Its counterpart, the Economic Development Board, used its brain
power and loads of incentives, including 10-year tax holidays, to
attract a range of industries and services to the island republic
to quickly soaked up all the unemployed.
This formula enabled Singapore to become the world’s third biggest
oil refining centre, one of the world’s key producers of
electronic parts and equipment, a hub for some petrochemical
production and home for a range of other industries, including
aviation and aerospace.
To turn its oil refining and petrochemical facilities into
reality, the tiny island republic – less than 700 sq km with about
4.5 million people – imported sand from Indonesia and Malaysia to
reclaim land to house such complexes, including the highly
successful Changi International Airport.
Singapore Airlines is one of the flag bearers for a
government-owned airline that is among the world’s best.
On the services front, Singapore competed with Hong Kong as one of
Asia’s key financial centres, helped by buoyant offshore financial
service as well as becoming a location for regional head offices
for a variety of global companies.
Part of the formula that many other developing countries would
find near impossible to imitate is the clinical application of
best management practice in a corporate setting virtually devoid
of corruption.
This is the stamp Lee affixed on his “Singapore miracle” virtually
from day one of independence in 1965.
When the British pulled out their military presence a decade later
with little prior warning, the Singaporean government took over
one of its shipyards, Sembawang Shipyard, to turn it into a
success story, attracting other private shipbuilders in the
process.
The government-owned Development Bank of Singapore has been a
pacesetter on the financial services scene and the government has
taken strategic investment stakes in various technology-related
companies.
It is ironic that the tiny island can wield so much influence in
the business world – it only covers an area that is three times
the size of Port Moresby.
When China embarked on its programme to put a capitalist face on
its communist style government, it engaged the service of former
Singapore deputy prime minister Goh Keng Swee, the economic brain
behind the ‘Singapore miracle’ and a man with a doctorate in
economics.
Singapore is certainly not resting on its laurels now that it has
developed country status and continues to aim at economic growth
rates of more than 5% – most of which translates to growth in per
capita income – while advanced countries like the United States,
Australia and Japan are extremely happy to grow in excess of 3%.
Singapore is becoming a significant player on the world stage as
well because of massive amounts of funds held for investment
purposes by the government’s Temasek Corporation and by
Singapore’s Government Investment Corporation.
Recently, the International Monetary Fund noted that some
countries are wanting to proactively invest some of their foreign
exchange reserves in a similar fashion to Temasek, although the
Singapore body mainly invests the superannuation funds of its
citizens.
At its latest People’s Congress meeting earlier this month, China
announced it would set up an organisation similar to Temasek to
invest some of the US$1 trillion in foreign exchange holdings it
has accumulated.
Analysts have suggested they could invest up to US$200 billion in
such a vehicle, and increase this by around US$100 billion
annually, making a significant impact on world financial markets.
The general thinking is that instead of mainly investing in US
Treasury bonds, where they earn 3-4% interest, the Chinese quite
naturally would like to be get a better return.
Temasek has reportedly had a return of about 6% annually over the
past three decades, but in recent years, returns have been around
18% annually and last year, it was 24%.
In recent years, most of Temasek’s overseas investments have gone
to China as part of a strategy to have one third of its assets in
Singapore, another third in Asia and the remainder in the rest of
the world.
Temasek has invested US$5.1 billion in China, where it has a 5%
stakes in three separate banks – the Bank of China, Minsheng
Banking Corporation and China Construction Bank.
The Singaporean corporation also has equity stakes in China’s
largest watch retailer, a manufacturer of engines and light
trucks, a regional air cargo carrier, a jet fuel supplier and the
country’s fifth largest power generating company.
One reason Singapore is very comfortable with many of these
investments is because it has an inside running track, being an
adviser on the reform of state-owned enterprises to the
government’s State-owned Assets Supervision and Administration
Commission of the State Council.
Meanwhile, the Malaysian government’s investment company, Khazanah
Nasional, has also announced plans this week to follow the example
of Temasek.
Khazanah’s managing director Azman Mokhtar said that like Temasek,
his organisation was keen to invest in banking and
telecommunications with analysts suggesting he would use local
companies, such as Maybank and Telekom Malaysia, to spearhead
international expansion.
The net value of Khazahan’s assets is US$16 billion versus about
US$120 billion for Temasek with companies in its portfolio said to
make up about a third of the market capitalisation of the Kuala
Lumpur Stock Exchange.
 
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