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Singapore has many similarities in its business environment to Hong Kong in terms
of the Chinese population, legal systems inherited from British. But other than that
they have trodden very different paths. The manufacturing contribution to the GDP
has fallen from 28% to 19% in the last decade but the same has fallen for Hong
Kong from 20% to 1%. Nonetheless this is much greater than developed countries
like USA, UK, France, Spain etc. However, Hong Kong and Singapore share the same
set of problems like land scarcity, tight labor market and competition from low cost
neighbors. Government has been helping in making Singapore a major destination
for manufacturing. It has realized that such an environment is important in making
Singapore a financial and business hub. Rolls Royce has a modern manufacturing
unit in Singapore and provides jobs to 4,20,000 people out of which more than 90%
are natives.
The government has listed its priority sectors in advanced manufacturing,
aerospace & logistics, applied health sciences, smart urban solutions and financial
services. The country is also trying to make sure that the other functions of the
business other than manufacturing are also developed in the country so as to make
the financial model of the country much more holistic and not dependent on just
one sector. Though Sinagpore claims to be state lean most of the successful
companies are government linked be it in banking, shipping, telecom, public
transport, high end engineering, marine utilities etc.
In finance as in manufacturing, Singapore plays host to the worlds biggest
institutions but rarely wins prizes itself. Its three local banksDBS, UOB and OCBC
are protected in their local market, a bone of contention when Singapore negotiates
free trade agreements and an irritation to foreign visitors, who find it harder to
pinpoint a hole in the wall that will accept their debit cards than they do in
Ulaanbaatar or Mandalay. In terms of market capitalization, Singapores stock
exchange is dwarfed by those in Hong Kong, Shanghai and Tokyo, its main regional
rivals as financial centers.
According
Given the economys strengths, Singapores officials can perhaps be forgiven for
seeming smug at times. But they are also, as one of their diplomats puts it, worstcase-scenario people, acutely aware of what could go wrong. One is that the
quality of lifethe soft factors that make Singapore so attractive to foreign
investorsmight deteriorate. The citys air is relatively clean (except when poisoned
by fumes from forest fires in Indonesia); international schools of all sorts are
available; taxes and crime
are low; bureaucracy is efficient; things work.