Saturday, August 9, 2008

Run S'pore as big city or small country?

Business Times - 01 Jun 2005

History provides the answer - being replete with instances of countries going into decline when they became city-focused


THE die has been cast. Singapore will have two mega integrated resorts (IRs) with casinos to be 'financed' ultimately by the global gambling community. However, the bigger question for Singaporeans - in the debate over casinos and IRs - is whether this nation should view itself as a small country or a big city.

Recently, the dean emeritus of MIT's Sloan School of Management, Lester Thurow, painted his big-picture concept for Singapore. He advised that Singapore should think about itself, not as a country, but as a city like San Francisco, Boston or New York. Prof Thurow's vision is very inviting.

However, I would like to argue that in order for Singapore to move into the big league of global cities, the Republic first needs to be focused on the fact that great cities generally thrive from being part of a great country.

The cities of San Francisco, Boston and New York all have large suburbs and the rest of the United States as direct and borderless hinterlands to support them. These cities are thriving because the prosperous country of America provides an intricate infrastructural network of economic activity and ready markets of consumers.

It would be hard to imagine, say, cosmopolitan San Francisco as a flourishing stand-alone city without the Greater Bay Area. This thriving metropolis bay area of over 6 million supports both global and small businesses, provides less expensive rental and housing, and helps to ease the usual cost and space constraints of a congested city. The Bay Area/Silicon Valley in turn relies on the prosperous state of California for good infrastructural support.

A great city (effect) is a result of a well-managed country (cause). The country (at different economic layers) as a whole has to do well in order for the city hub to thrive. But when the city becomes great, and the country forgotten, we will start to see the decline of the entire country.

If we were to look at some previously great cities, we can attribute instances of decline of the country to when they became city-focused. For example, when China was run primarily at the 'Forbidden City-level' centered in Beijing, China was city-focused, and thereafter went into a long state of decline.

Hence, for Singapore to achieve a global-city status, it needs to be viewed and run as a top-rate country. The 'city' will then naturally take on a world-city image and status. The larger issues of the country must first be addressed before the 'city' can flourish.

Singapore Inc branding

How will welcoming the two casinos affect the Republic of Singapore's image? A city-level strategy will find Singapore viewed as the Las Vegas of the East, not unlike Macau and Monaco. A country strategy, on the other hand, will have just pockets of Singapore - that is, Sentosa and Marina South - considered the Las Vegases of Singapore.

Singapore must think carefully how it plans to develop its marketing image to the outside world, for global tourism and the foreign investment market.

If Singapore is marketed as a 'Casino City' for the tourism dollar, this would definitely be at odds with Singapore's carefully-earned wholesome reputation as an attractive location for overseas investments. The mentality of 'quick bucks' - rather than steady returns on investments resulting from solid hard work, skills and reputation - may take hold.

If this happens, the Republic's dream of going into serious industries like biomedical and other higher value-added activities could become a marketing nightmare. Hence, a well-planned country-level strategy must ensure that Singapore's name does not become synonymous with the word 'casino'.

The correct branding of Singapore's image is key to the country's continuing success.

Singapore's post-war situation makes for interesting analysis. Post-war Singapore had high unemployment and a largely uneducated and unskilled workforce. A city-level strategy then could have meant glamorising colourful Bugis Street with its transvestites, and moving to an easy sleazy image of fun and entertainment. Our medical sector could have earned the dubious distinction of being No 1 in medical surgery for sex-change operations.

Instead, the Republic adopted a country-level strategy of developing a strong manufacturing sector, thanks to a Dutch economist, Dr Albert Winsemius, who led a UN Industrial Survey Mission to Singapore in the late 1960s.

This strategy would lead to Singapore's remarkable economic transformation from post-war poverty and unrest to a nation which created steady employment and skills and brought prosperity for decades to come. A huge industrial estate was born from converting swampland in Jurong into well-laid-out land for buildings and factories.

Land availability, pricing, and location were all centrally controlled and well managed through Jurong Town Corporation's (JTC) industrial land and leasing policies.

The other factors of production - labour (through the National Trades Union Congress) and capital (through the Monetary Authority of Singapore) - were also well managed and gave investors confidence to make million-dollar investments in plant and machinery here. American and European conglomerates like Hewlett-Packard, Texas Instruments, Seagate, Infineon (then Siemens Components) and Philips spawned an entire new economic sector for Singapore. Manufacturing has been an important economic contributor, contributing some 25 per cent of the country's GDP.

Cost control

Today, a different type of global economy exists. Singapore has to adapt to a completely new set of economic challenges. Industries and ways of doing business are morphing at an ever faster rate. The mushrooming of dotcom companies can bubble over overnight.

Global corporations which for decades were household names are acquired or fade into oblivion. China, not Asia as a whole, is the new centre of production for the world.

As Singapore is physically a small country, the cost of doing business is high - like that of a 'big city' without its own supporting hinterland.

In 2003, then prime minister Goh Chok Tong remarked that, 'For every one manufacturing worker hired here, a company can employ three in Malaysia, eight in Thailand, 13 in China, or 18 in India'. However, for each Singapore worker here to work 18 times harder than his counterpart in India is going to be a near-impossible task. Working 18 times smarter is possible, however, but may require a paradigm shift.

For example, the delayering of organisations here will continue. Multi-functional, multi-skilled and multi-tasking executives will be the way forward.

A $5,000 per month engineer here will have to think and work more like a $5,000 departmental manager in India. This type of attitude towards work and productivity must be translated into society at all levels across the country.

Again, at a country level, the skills in which young Singaporeans are trained must be put to good use. Technicians and engineers, for example, must be able to see a clear long-term role for them in the manufacturing and technical services sectors. The relocation of MNC plants from here to China - based on costs, for example - will put a major dampener on career aspirations in manufacturing.

The attrition of good technically-trained workers who do not see a rosy future in technical work will create an increasingly smaller pool of workers with the skills, knowledge and experience which Singapore has invested heavily in.

Singapore, at a country level, needs to continually and creatively price itself correctly to ensure that the existing base of key and supporting industries can continue their operations here. Manufacturing companies provide the cascading spin-offs to the financial, legal, logistics and transportation industries which are other key sectors of the economy. A concerted, innovative, image and cost-control strategy at the country level will allow Singapore to retain top-notch foreign and local investments in the economy.

'Growing its own timber'

In the US, mergers and acquisitions (M&A) of businesses are commonplace. In these M&A deals, the ownership of these companies generally still rests within corporate America.

As such, corporate ownership, control and profits are retained within the country even if some of the activities of these US-owned companies can be contracted abroad.

In Singapore, however, when companies are sold, ownership often ends in foreign hands. To maximise shareholder value, these businesses are sold to the highest bidders, often overseas investors, as few private-sector companies here have the resources and/or interest to mount these buyouts.

Hence, Singapore as a country should re-evaluate its 'detimbering' approach. The Republic has, over the last few years, lost control of quite a few of these companies. Some examples of ownership sell-offs of established home-grown companies to foreign parties include CPG (formerly government-owned PWD Consultants, with a well-regarded brand name) to Australian Downer, and property management company Premas (formerly owned by government-controlled CapitaLand) to Australian United Group.

Singapore Inc, via the government-linked companies (GLCs), should ensure that the Republic continues to 'grow its own timber' (borrowing former top civil servant Ngiam Tong Dow's words), including maintaining ownership of non-strategic, but nevertheless profitable, businesses.

A well-positioned Singapore (as a country) with key economic and social issues well handled and addressed will then naturally give rise to a great Singapore city which could conceivably be mentioned in the same breath as global cities like San Francisco and New York.

The writer is a mechanical engineer by training, and a business consultant by profession,with CEO Search & Services

Copyright © 2005 Singapore Press Holdings Ltd. All rights reserved.

No comments: