The truth however, is that the old and successful economic
paradigm that has been responsible for the rapid progress and
development of the 60s to 80s frame is definitely being overridden.
And it is also eventual that the Singapore economy will begin to
fail and falter, as with the economic life-cycle of other similar
developed markets. This process was merely being hasten up by the
above mentioned events.
Unlike the frame from the1960s to the 1980s, the former economy
strategy of injecting extensive capital intensive activities is now
fast being copied and rendered irrelevant.
Aspired by the sight and smell of the Singapore success, the
regional third world economies are currently pursuing a common
economic strategy which is typically expected of from developing
countries, and that is to first revolutionalized upon their
internal core activities from post agricultural and into a heavy
base of light and medium-heavy industries.
With the electronics and general manufacturing industries falling
under such classifications and aided further by the ever-existing
demand for their low production cost products, it had been clear to
the Singapore Government that the reliance on these pillars would
have to be eventually shifted upon a higher curve, and into more
complex and intensive-coordination required fields.
As researched and revealed upon by the Kruskal-Wallis Test which
was conducted to find out on what were the primary determinants
that had attracted Japanese MNCs to invest in Singapore over the
other available SE Asia countries in the region, it was concluded
that the main attractiveness that had been offered by Singapore,
laid within the rigid but transparent structure of the island
country.
And unlike the common expectation that Japanese investments had
flown in here mainly as a result of attractive Policy variables
such as tax holidays or relaxed profit repatriation regulation, it
was actually the Non-Policy variables that had played a greater
role as the right bait.
As identified within the Kruskal-Wallis study, the Non-Policy
Variables included factors such as :
1. Political & Economic
stability
2. Country knowledge
3. Local market size
4. Establishment of export
base
5. Raw material availability
6. Import / tariff /
barriers
7. Free trade zones
8. Labor cost
9. Tax deductions /
incentives
10. Location / presence of Competitors
11. Local content exemption
12. Governmental subsidiaries / state
incentives, protection etc.
While the factors highlight in blue represents favorable conditions
that Singapore is able to offer, many of the former strengths are
also fast being eroded by the rapid improvement and evolution by
our surrounding competing foreign economic systems.
On political stability, things in SE Asia are now different from
what it had been twenty years ago.
Vietnam is now well recovered from its former internal political
in-fighting. Although sporadic handful of resistance still exist
against its PM, the governmental structure is now more or less
stable, though not entirely transparent.
Thailand has seen its military influences within the government, as
well as the former propaganda fear of the country being suddenly
seized over and turned into a military controlled state by the army
as popularly fantasized upon back in the 1980s, significantly
reduced.
And in the Philippines, the impeachment of Estrada and the
subsequent rise of Arroyo into power has also been symbolic in its
conveyance of the message that the country is sick of its former
corruption flamboyant running, and that the civilians there want
true accountability and honesty from its government from now
on.
Within the economic frame, the former Asia Four Dragons are also
fast losing their shine from the inescapable theory of diminishing
growth and returns. And by contrast, having been vigorously slapped
right in their kisser by Soros during his currency hedging game
back in 1997, the issue of financial loopholes that were in
existence and unmonitored within SE Asia markets were diligently
revisited and repaired.
While it cannot be said that true transparency and accountability
over both the flow or management of funds truly exist, it cannot be
denied that there are now, more whistle blowing systems in
vigilance guarding.
National fiscal policies, both successful and unsuccessful, had
been amended following the post 1997-98 era in a bid to redirect
lost investments back into the respective SE Asia countries, as
evident from the Malaysian pegging of the Ringgit to the USD, and
the unsuccessful attempt by the IMF to implement upon Indonesia,
its economic restructuring package.
The depreciation of the Thai Baht in irony, has even turned the
country more competitive in the post Asia Financial Crisis years,
as evident from the flock of even local F&B investments into
the country as lured by the low cost of investment startup
required.
And coming into the issue of state protection or incentives, we
have seen the Malaysian Government granting a monopoly to its
domestic carmaker, and India giving a certain soft drink giant, the
monopoly over the entire countrys market. These allures, are
certainly not realities that you will find offered to a foreign
investment company that is coming to invest here.
In reviewing upon all of the subsequent change that has taken
placed so much around us, Singapore must note of all these shifting
variables as well as its own position along the life-cycle map of
economic growth from the old Manufacturing Based Paradigm, and
eventually realize to discover on its over-looked weakness.