Singapore Inc. MBA 290G Case 2 September 12, 2007 Sarah Boyd, Vincent Escobedo, Gayathri Raghavendra, Jay Taneja

Outline Singapore Today –How is it similar to or different from the SF Bay Area? How did Singapore become the success story it is? –Metrics of success –Porter’s Diamond –Other factors Where does Singapore want to be tomorrow? Are they on the right trajectory?

Singapore – A Snapshot Singa Pura, Malay for “Lion City” Area: 699sq km Population: 4 million+ Demographics: 76% Chinese, 15% Malay, 6% Indian Government: Parliamentary Democracy

Singapore & SF Bay Area: The Numbers MetricSingaporeBay Area Population4.55 million million 2 GDP$141.2 billion 3 $401 billion 4 Annual Real Growth Rate 2005: 6.6% 2006: 7.9% : 3.9% 5 International Exports $271 billion 3 $44 billion 4 1. Conutryreports.org; ; 4. ; 5.

Singapore and SF Bay Area: Similarities Major Industry Clusters: Semiconductor and Biotech Major Ports Singapore: 24,792,400 TEUs in 2006 (16) Oakland: 2,391,598 TEUs in 2006 (7) (10-15% of US container cargo) (6) (7)

Singapore and SF Bay Area: Differences Bay AreaSingapore R&D, DesignManufacturing, Trade Industry clusters grow out of academic research: semiconductors in the 50’s, 60’s and 70’s, biotech and internet software in the 80’s and 90’s, nurtured by venture capital. Industry clusters created and nurtured by government (EDB, Temasek) InnovationEfficiency

The Rise of Singapore Per capita GDP growth ~ 5% from : 10.1% 2001: Worldwide slump, -2.2% 2004: Major turnaround, 8.8% (8) Asian Economic Journal 16 (3), 267–283, (9) United Nations Statistics Div. (10) US Bureau of Economic Statistics

The Rise of Singapore: Why and How?

Factor Conditions Location (heart of major sea lanes) NO natural resources – had to be smart, depend on trade Infrastructure (Physical, financial) IP Policy Labor pool (work ethics, trained vs untrained, skill level, foreign vs domestic) Government Strong ties between pro-business state & industry Govt. is consistent and not corrupt Govt. anticipates infrastructural needs Actively built/crafted IP environment Strong handling of unions, wage policies, education, policies to attract foreign students & workers

The Rise of Singapore: Why and How? Demand Conditions Small domestic market led to pro-business, pro-foreign, export oriented policy Positive for electronics, communications: early adopters, “technology crazy”, discerning and demanding Negative for biotech: relatively new industry, no stress test for bio- ethics issues Government Encourages widespread use of technology Tablet PCs in school Curbs freedom of expression/media

The Rise of Singapore: Why and How? Related and Supporting Industries For biotech => Chemical Island For hi-tech => Electronics Manufacturing Broad based benefits from shipping and transportation industry, legal and IP services, logistics, data management, and more recently brand management Government Following cluster model for industry development Targets entire value chain in an industry to offer a stronger value proposition to individual firms

The Rise of Singapore: Why and How? Firm Structure, Strategy, Rivalry, Structure: Gradually moving away from state-owned Strategy: Attract foreign investment with business friendly environment Rivalry: Intense rivalry faced by Singapore Inc, but very low level of domestic competition for firms Government Primary driver of growth; salaries of policy makers tied to GDP growth

The New Singapore: What next? Measures Focus on education, creative learning Move from dual pronged approach to Triple Helix model (State-Industry  State-Industry-Academia) Encouraging VC & PE Focus on specific clusters like biotech; media Current Strategy Goals Transform Singapore into a knowledge-based economy Move up the value chain Encourage innovation

The New Singapore: Comments and Recommendations Labor and Talent Pool Increasing dependence on foreign contribution – Young Singaporeans moving away (overbearing state, inflation) –Shortage of home-grown entrepreneurs Focus on increasing local skill set and skill levels

The New Singapore: Comments and Recommendations Focus on Biotech Strengths Chemical Lax regulation Gateway to Asia Weaknesses Depending on foreign talent Local market is a poor predictor of world market Opportunities High Growth Early mover Threats Direct competition with SV Very risky

The New Singapore: Comments and Recommendations Creating an entrepreneurial mindset is a long term project, especially in a society where conformity is the form (11) Giving Singapore a SV Mindset, BusinessWeek, August 2000 Increase contribution from non-governmental sources Give universities more autonomy Reduce government stake in companies, encourage more local competition Deregulation is a serious challenge

The New Singapore: Comments and Recommendations Other Concerns with current strategy Social backlash - widening gap between rich and poor - locals feel (43%) (12) government cares more about foreign professionals than local population - aging population that cannot support itself High Savings Rate -Reduces available pool of capital - Could be diverted to stem property market inflation or invest in skill enhancement programs (12) Singapore goes back to its Roots, Financial Times, Aug 07

The New Singapore Growth thus far has mostly been achieved by increasing inputs More labor, more capital, more investment, more education, more training This cannot go on! Need new strategy! (12) Singapore goes back to its Roots, Financial Times, Aug 07

Singaporeans and Saving (13) (13) 2001 CPF Annual Report via case study Gross National Savings: 46% in 2001