Asia Times: Singapore at the crossroads


	April 13, 2002	atimes.com

Southeast Asia

Singapore at the crossroads
By Tony Sitathan

SINGAPORE - When news broke nearly two years ago that Mearsk Sealand, considered the world's largest shipping company, was going to relocate from Singapore to the Malaysia Port of Tanjung Pelepas (PTP) in Johor, the first real doubts arose in the island state that perhaps its natural economies of scale and competitiveness in terms of its port facilities vis-a-vis its neighbors were fast eroding.

Similarly, this sentiment was echoed in its immediate neighbor - Malaysia. It subsequently won another significant tug-of-war when it succeeded in attracting Evergreen - the Taiwanese shipping giant that once contributed almost 1 million TEUs (20-foot equivalent units) of cargo each year to the Port of Singapore Authority (PSA).

One country's win is another's loss. However, despite such negative streaks in Singapore's maritime pristine record - still considered the world's number one container transshipment port - it has viewed its losses as not having a significant impact on its financial performance.

The PSA predicts that growth in the marine industry has, on the contrary, not slowed down and it has booked orders for around S$5 billion (US$2.7 billion) that will be fulfilled over the next 18 months. It also has stakes in 13 overseas port projects in over eight countries. Not a bad record for a regional port player.

In the same light, the Singapore logistics and supply chain management industry, considered one of its engines of economic growth, has also seen signs of recovery and consolidation. "We see more economies of scale and shorter product life cycles, and hence it is important where you relocate your logistics center in Asia," said an official from DHL Singapore. Singapore is now home to DHL's biggest shipment hub in the Asia-Pacific region. It has tied up with Singapore Airport Terminal Services (SATS) as its strategic partner and invested more than S$34 million in the project.

According to a report from the Economic Development Board, the performance of the logistics and transport cluster remained strong despite the fallout in the electronics and manufacturing sector. It achieved nearly S$400 million in manufacturing fixed asset investment (FAI) or about 4 percent of total FAI, and in terms of services total business spending, it was the second highest contributor, next only to manufacturing.

What is significant is that companies in the Asia-Pacific region, including Singapore, have come to accept the benefits of outsourcing across a broad range of business functions, according to a recent study by International Data Corporation. It reported that IT (information technology) outsourcing is improving and the external control of a supply chain is a significant factor leading to the success of the logistics industry. There would, however, be significant challenges in the e-logistics side as supply chains become shorter and more value chains are created, hence creating consolidation in the industry.

What does it mean for companies in general? Inefficient practices would come to an end as they scramble internally to boost their efficiencies of scale. "It's an inward-looking business process, especially where cutting costs are concerned in making shorter deliveries and keeping lower inventory levels," remarked Susan Tan, from EXE Technologies, a global leader in providing third-party logistics solutions.

According to Colin Miles, the executive vice president of business development for NetMegastore Pte Ltd, a local company dealing with providing innovative Web-based solutions to international clients, Singapore needs to be positioned as the info-communications hub and attract talent and innovation to support the physical infrastructure being put in place. "Outside of Japan and Korea, Singapore is as strong as any country in terms of broadband and mobile application adoption and the ideal market to prototype solutions destined for larger markets," he remarked enthusiastically.

Besides having a good infrastructure in place and having sound fiduciary policies, as well as a corruption-free government, and attracting billions of dollars in foreign direct investment (from chemical and petroleum projects, to life sciences and biotechnology to semiconductor and wafer fabs) - all hallmarks of a successful Singapore - the one thing that Singapore lacks is building up local companies and the overall lack of entrepreneurial drive.

According to Professor Michael Porter, for Singapore to face up to global challenges, more attention needs to be focused on making local companies more competitive so that they can power Singapore's economy into the next stage of its development. Right now, only the multinationals driven by the Economic Development Board and other government-led bodies are leading this initiative. This complete lack of participation, with the exception of world-renowned companies such as Singapore Airlines and Creative Technology, spells doom in the long term for Singapore.

True enough, without giving the right incentives or the right environment for local companies to flourish, Singapore would be in a difficult position to excel independently and would be at the mercy of multinationals - who are always looking for ways to maximize their returns and minimize their operating costs. What next after the multinationals? Is there a clear policy to spawn local companies to look after national interest and international markets?

"Look around Singapore, how many world renowned companies do you find? Most of them are government-linked. Imagine if there was no pro-active business-minded government there would be no truly successful global companies. How many Sampoernas [the Indonesian clove-cigarette company that has overseas listed shares] or Tatas [the Indian conglomerate that has a global market] or even Acers [the Taiwanese IT company that is a global brand] would Singapore be home to?" remarked R Rama Krishnam, managing director of a company based in Malaysia that does precision molding.

By not building up enough world-class companies such as those found in Korea, Taiwan or even in Indonesia (which is almost privately managed and run), Singapore is at a crossroads.

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