Financial Times has recently interviewed our CEO, Declan O’Sullivan on his views regarding Singapore’s strengths and weaknesses in terms of economic competitiveness.
Singapore worries how a small nation that has thrived in an era of trade liberalisation and openness will prosper if globalisation starts to go into reverse. And its leaders fret that its advantages are slowly disappearing in the face of competition from a more prosperous and assertive China.
The country has faced a series of alarming indicators:
For example, Singapore Airlines, which was once the passenger airline industry’s pacesetter for innovation and standards of luxury, reported an unexpected quarterly loss in May after coming under intensifying pressure from competitors. The rise of China is a common theme behind many of Singapore’s pressure points. The airline has suffered as Chinese tourists take domestic airlines on nonstop flights rather than stop over in Singapore; mainland Chinese companies have preferred Hong Kong to Singapore for their listings; and the port of Shanghai is booming while container traffic through Singapore stagnates.
Manu Bhaskaran, a Singapore-based partner at Centennial Group, an economic consultancy, says: “The single biggest challenge to Singapore is the value proposition, which is a combination of competitiveness — including costs — and how the city has chosen to position itself.”
High costs have also made investment in Singapore less attractive. Singapore saw a 13 per cent drop in foreign direct investment inflows last year, falling to $62bn, the lowest level since 2012, according to Unctad, the UN trade and development agency.
However on the bright side, according to our CEO, Declan O’Sullivan, “the general workforce in Singapore is great, Singapore greatest strength is adherence to process, teamwork and a work ethic. Where process is automated, the role of human capital must be to add value in terms of creative thinking.”
The city-state retains powerful advantages, such as the stability of its governance, the depth of professional skills and the rigour of its education system. Tax incentives, including temporary rates as low as 5 per cent for companies setting up regional headquarters, its efficient infrastructure and the high quality of life on offer to expatriates also appeal.