Singapore Case Solution

1. What are some distinctive sources of nation-based competitive advantage that Singapore has harnessed to achieve such fast growth and pre-eminence in the global economy over the past few decades? How has Singapore attempted to position itself in the global economy?

The nation-based competitive advantage that Singapore has harnessed to achieve rapid growth and eminence in the global economy includes the factors as highlighted in Porter's Diamond Model. Factor conditions such as a focus on developing the infrastructure had been prioritized. Singapore's government invested heavily in developing industrial states to attract foreign firms such as the incorporation of Jurong Town Corporation (JTC) which transformed the swampland on Singapore's southern coast into Jurong’s Industrial Estate for manufacturing firms. Apart from this, Singapore had also invested heavily in the infrastructural needs for research needs of Bio Medical Sciences (BMS) companies. The country also supported and facilitated the need of skilled labor force, as well as special focus, had been placed on building the country's scientific knowledge base promoted through initiatives such as attracting world-class educational institutes and encouraging innovation with scholarships and awards. Taking into context the demand conditions, Singapore had a small domestic market, and its initial initiatives of import substitution had failed along with limited natural resources hence, the environment led to a pro-business, pro-foreign and export-oriented policies. As for the related and supporting industries factor, Singapore focused on a cluster model for industry development initially concentrating on developing industries related to ship refitting and repair, metal engineering, chemicals, and electrical equipment and appliances. They government also believed in targeting the entire value chain to offer a strong proposition to the individual firms. The focus was on moving the economy as a whole up the value chain towards knowledge-based sectors. From the perspective of firm structure, strategy and rivalry; a shift was seen towards moving away from state owned enterprises whereas the strategy focused on attracting foreign investments within the country. Singapore has positioned itself in the global economy as a country with a strong economic outlook through its six major policies: investment in the state, active encouragement of foreign investment, a pro-business environment, free trade, a tight monetary policy, and high savings.

2. Why do you think the Singaporean government chose to invest heavily in ship repair, metal engineering, chemicals, and electrical equipment/appliances during the 1960’s?

During the 1960's, Singaporean government chose to invest heavily in ship repair, metal engineering, chemicals, and electrical equipment/appliances because initially, the country had a 14% unemployment rate which was termed as the second most pressing issue that the Singapore’s economy faced. Hence, to cater to that, the government chose to invest in labor-intensive industries as stated above since it needed to find new sources of employment for its people. The government also decided to build homes for people as per the Housing Development Board's (HDB) objective. This included the creation of basic public housing units as well as providing jobs and homes to Singaporeans at a subsidized rate. The government also chose to invest in the listed industries as they had the potential to rapidly employ a maximum number of people with minimal state investment.

3. How would you evaluate the degree of government involvement as it relates to the evolution of industries in Singapore? Has Singapore’s political situation been an asset or liability in attracting foreign investment?

The degree of government’s involvement in case of Singapore’s industrial evolution has been extensive as it facilitated the country’s overall development through the initiatives it had taken. These included drafting policies relevant to unions, wages, education along with attracting foreign direct investment as well as students and workers. Not only this, but the salaries of the senior officials were also tied to the GDP growth. Hence, the approach adopted was not different from a private industry where the management's bonuses are tied to the company's overall gains/losses. Singapore's government had been at the forefront to develop external relations as well through promoting regional trade and stability. The government also developed acts such as Economic Expansion Incentives Act to attract manufacturing firms in the region by providing them tax benefits. These in the long term help the country to move up the value chain as its economy matured. Singapore's political situation has been an asset, in the long run, to attract foreign investment because, after PAP's victory in 1968 elections, issues pertinent to labor unions which posed a great threat in attracting foreign firms will deal with swiftly. Wage level was regulated through the National Trades Union Congress as per the new legislation which also represented workers' interests. Not only this, initiatives were taken to improve the standard of living, distinguishing Singapore as an investment hub as well as improving prospects of tourism in the country; a movement ‘clean and green' was initiated.