1

Singapore‟s

Technological Growth: The Government and Market

debate

Kathryn Ashcroft

2

Acknowledgements

I would like to thank the University of Singapore and its staff for kindly allowing me to use their library facilities while I was researching this dissertation. I would especially like to thank Dr Henry Wai-Cheung

Yeung for advising me on my visit to Singapore and introducing me to three of his MA students Winston, Selene and May, to whom I also

extend thanks for their helpful insights into Singapore and for showing me how young Singaporeans live and what their expectations are.

I would also like to thank the British Library Boston Spa Reading

Room for allowing me to use its facilities, and its excellent and helpful staff.

3

Singapore‟s Technological Growth: The Government and Market debate

Page no.

4 1. Introduction 5 1.1 The emergence and growth of the East Asian NIEs 7 1.2 Technology; at the heart of economic growth 8 1.3 The government and market debate in East Asian NIEs 10 1.4 Singapore as an NIE

14 2. Framework 14 2.1 Technological development and the importance of knowledge and learning 19 2.2 Technology transfer 21 2.3 Research and development 24 2.4 Summary

27 3. How is Singapore different? 27 3.1 Why is it worth studying over other NIEs? 33 3.2 The government/private sector balance

37 4. GLC case studies 37 4.1 Temasek Holdings 39 4.2 The Port of Singapore Authority 43 4.3 Singtel 45 4.4 Singapore Airlines

48 5. Conclusion 49 5.1 Is government intervention in Singapore's economy still necessary for technological growth? 50 5.2 Can one speak of a Singaporean model for development? 51 5.3 What does the future hold for Singapore?

53 Bibliography

4

1 : Introduction

An NIE is a Newly Industrialised/Industrialising Economy (also referred to

as an NIC or Newly Industrialised/Industrialising Country). NIEs exist worldwide

but the most successful are those in East Asia, the four tigers that joined Japan

in becoming powerful economies, namely, Taiwan, South Korea, Singapore and

Hong Kong. The NIEs have often been grouped together and presumed to share

common characteristics. These characteristics are desired as explanations for

the successes and failures of the countries.

For many people, the importance of studying the NIEs lies in attempting to

identify an economic model that underlies their success, a model that can ideally

be transferred to other countries in order to make them more successful. Two

main schools of thought1 have emerged with regard to a model and its

transferability. The first school understands economic success to be cultural and

attributed to the economy's values, its institutional structures and its social

relationships while the second school maintains that economic success is

explained by the economic strategy of the country. Of course many studies have

shown these two schools to overlap, but to understand a theory fully, it is

important to look at where the theorist sits on an ideological scale.

1 Identified in Papanek, Gustav., 'The New Asian Capitalism: An Economic Portrait' in Berger,

Peter L. and Hsiao, Hsin-Huang Michael (ed.'s) In Search of an East Asian Development Model (Oxford: Transaction Books, 1988) p.27

5

1.1 The emergence and growth of the East Asian NIEs

The East Asian NIEs began to emerge in the 1960s and their success in

part, can be traced to this favourable timing. At this time the world economy was

conducive to trade and exports. As Japan moved towards producing less labour-

intensive goods, the East Asian NIEs stepped in and began their labour-intensive

export expansion.2 Their emergence represented a real shift from the North to

the South in productive resources3 and the countries took what Papanek

describes as 'concrete steps' towards accessing the technology and markets

they required for their newly developing export industries.4

Early exports were produced in a labour-intensive environment which

required little capital or worker skill (such as textiles and simple electronic

goods). As the labour market became fully absorbed into the new industries,

wages rose, training programs began and savings rates increased. This led to a

higher level of capital and skilled labour which in turn developed the exports

towards more capital and skill-intensive products (consumer electronics such as

TVs, simple and then complex machinery leading to automobiles and then to

ships). Papanek explains that all of the NIEs 'played to their strengths and

worked with and reinforced market forces rather than trying to swim against

2 Hsiao, Hsin-Huang Michael., 'An East Asian Development Model: Empirical Explorations‟ in

Berger, Peter L. and Hsiao, Hsin-Huang Michael. (ed.'s) In Search of an East Asian Development Model (Oxford, Transaction Books, 1988) p.15 3 Evans, Graham. and Newnham, Jeffrey., The Dictionary of World Politics (New York, London,

Toronto, Sydney, Tokyo, Singapore, Harvester Wheatsheaf, 2000) p.274 4 Papanek, 'The New Asian Capitalism: An Economic Portrait', p.p.72-73

6

them.5 The success of the East Asian NIEs can also be attributed to

technological advance, which Kim and Nelson describe as the key driving force

for accounting for „the lions share of productivity growth‟ a force which has

helped the economies transform from „technologically backward and poor to

relatively modern and affluent economies.‟6 Technological growth as an

explanation for economic success is the main topic of this study and is a theory

that straddles the two schools of thought highlighted above.

Evans and Newnham believe that the NIEs had three advantages within

their borders; stable political regimes (although not necessarily democratic), high

entrepreneurial skill levels within their populations7 and economies open to

foreign investment. However, these factors may not have been sufficient had the

NIEs (with Hong Kong being the exception) not enjoyed the support of AICs

(Advanced Industrialised Countries) who allowed them to expand their

manufacturing sectors through experiencing 'comparative costs vis-à-vis the

market leaders.'8 However, much of the credit is owed to the NIEs themselves

with particular reference to their flexible attitude towards selling their products

under a foreign firms' branding in order to gain foreign market experience and to

5 Ibid, p.p.46-47

6 Kim, Linsu. and Nelson, Richard R. (ed.'s) Technology, Learning, and Innovation (Cambridge,

Cambridge University Press, 2000) p.ix (preface) 7 Is this a development or a discrepancy? Ser claimed 'Singapore has only a handful of home-

grown, private sector entrepreneurs with the ambition and funds for major international expansion.' Ser, Toh Thian., 'Creating a new urban élite for Singapore' in Da Cunha, Derek. (ed.), Debating Singapore (Singapore: Institute of Southeast Asian Studies, 1994) p.153. It is likely to be a development as Ser was writing in 1994 and Evans and Newnham were writing in 2000. There have been changes in education (see Chapter 2.1) and it is noteworthy that the Prime Minister spoke of the Singaporean people as having 'skill, creativity and enterprise' in his National Day Rally Speech in 2003. Prime Minister Goh Choc Tong, 'National Day Rally Speech 2003', www.channelnewsasia.com/nd2003/rally/rally_eng1.htm, Accessed 13/03/04 8 Evans and Newnham, The Dictionary of World Politics, p.274

7

enable the development of a reputation for quality and then exporting under their

own brands.9 Important aspects of successful technological growth will be

discussed in full in chapter two but it is worth noting here that Knowledge and

Learning and Technology Transfer were covered when the NIEs used foreign

companies to gain market access. Research and Development came later but

grew on these foundations.

1.2 Technology; at the heart of economic growth

In 1943, Schumpeter made the following observation: 'the fundamental

impulse that sets and keeps the capitalist engine in motion comes from the new

consumers' goods, the new methods of production or transportation, the new

markets, the new forces of industrial organisation that capitalist enterprise

creates.'10 There are four types of technological development; incremental

innovations which are small-scale and largely pass unnoticed, radical innovations

which drastically change products or processes, changes of technology system

which affect many parts of the economy and may generate new industries (the

semiconductor industry for example) and changes in the techno-economic

paradigm which are large scale revolutionary changes. Clusters of radical

9 Papanek, 'The New Asian Capitalism: An Economic Portrait', p.p.72-73

10 Dicken, Peter., Global Shift (London: Paul Chapman Publishing Ltd, 1992) p.97

8

innovations, changes of technology system and changes in the techno-economic

paradigm all have the potential to radically change a country and its economy.11

Associated with, although not created by Kondratiev, is the notion that

global economic growth occurs in waves lasting around 50 years. The first wave

(1800-1850) saw steam power, cotton textiles and iron as the new technologies

and saw Britain, France and Belgium as its leaders. Subsequent waves have

seen railways, electricity, chemicals, automobiles, electronics, synthetic material

and petrochemicals emerge as new technologies and Germany, the United

States, Switzerland, the Netherlands, Japan and Sweden become technological

leaders. In the late 1980s, early 1990s a new cycle seemed to be beginning with

the NIEs as contenders for leadership. The new technologies associated with this

fifth wave are information technology, biotechnology, materials technology,

energy technology and space technology.12

1.3 The government and market debate in East Asian NIEs

It was during to the emergence of capitalism that the idea of governments

and markets as exclusive and opposing forces emerged, starting the government

and market debate. Galbraith states that classical economic thought held that

economic activity was self-governing and subject to inbuilt constraints that

neutralised political power; „If the economy worked automatically and well, there

11

Ibid, p.98 12

Ibid, p.p.99-101

9

was no case for intrusion by the state.‟ In the cases where states have regulated

activity, regarding monopolies for example, it was because the system

demanded it, not because the state wished it.13

However, where an economy is new or fragile, a favourable institutional

framework can enable and encourage growth. A favourable institutional

framework has been suggested14 to have two characteristics, which are found

within NIEs; close government ties with businesses to the extent that policies are

developed in cooperation with the private sector and highly motivated

independent and capable bureaucrats.15 The debate centres on the degree of

influence this framework could have on private sector activity.16

In order to measure framework influence or state intervention, one must

consider issues such as state ownership of production, public investment and the

attraction of foreign direct investment.17 State intervention as an explanation for

East Asian success is fairly recent. Wade states that in the 1970s and 1980s,

market-supremacy interpretations were the focus, for example, „economic

openness and small government‟ and „government intervention … insofar as it

promoted exports and offset market failures.‟ Since then alternative interpretation

have included „Confucian group-mindedness and frugal consumption preferences

13

Galbraith, John Kenneth., The World Economy Since the Wars – A Personal View (London: Sinclair Stevenson, 1994) p.p.47 and 52 14

In The East Asian Miracle Report cited in Weder, Beatrice., Model, Myth, or Miracle? Reassessing the Role of Governments in the East Asian Experience (Tokyo, New York, Paris: United Nations University Press, 1999) p.3 15

Ibid, p.3 16

Weder draws attention also to government influence on industrial policies and 'Asian Capitalism' and 'Asian Values'. Ibid, p.2 17

Dicken, Global Shift, p.177 and Papanek, 'The New Asian Capitalism: An Economic Portrait', p.31

10

combined with a get-up-and-go entrepreneurialism‟, „external demand generated

by the rhythm of Western capital‟, „business management‟ and what Wade

identifies as the most popular unorthodox theory, „a certain type of government

role in the economy.'18

The question of whether growth in the East Asian NIEs has been market

or government led is the second main subject of this study. Technological growth

and the government and market debate will be considered with Singapore as a

specific example with comparisons made to the other NIEs and other countries

where appropriate. In the last part of this chapter there is a brief overview of

Singapore and a discussion of Singapore as an NIE.

1.4 Singapore as an NIE

The Singaporean government has a large degree of intervention within the

market, to the extent that Pye defines it as 'quasi-authoritarian' or 'semi-

authoritarian'.19 However, Pye points out that it is a 'paternalistic' method of

government that exists in East Asia and that while power is often held by a small

elite with a lack of toleration for dissent, the reinforcement of a party or group by

political controls and limitations on free press, there are the positive aspects such

as the recognition of merit and encouragement of development on a national

18

Wade, Robert., Governing the Market (Princeton: Princeton University Press, 1990) p.p.4-5 19

Pye, Lucian W., 'The New Asian Capitalism: A Political Portrait' in Berger, Peter L. and Hsiao, Hsin-Huang Michael. (ed.'s), In Search of an East Asian Development Model (Oxford: Transaction Books, 1988) p.82

11

scale.20 East Asia does not have a tradition of democracy so it is important to

understand that an authoritarian regime may be highly legitimate. Singapore has

a legitimate government that places its intervention within Singapore's economy

in a positive context.21 This is best understood in the Prime Ministers own words:

In Singapore, government acts more like a trustee. A custodian of the

people's welfare, it exercises independent judgement on what is in the

long-term economic interests of its people and acts on that basis.

Government policy is not dictated by opinion polls or referenda. This has

sometimes meant overriding populist pressures for "easier" economic

policies. Indeed, implementing the right policies has on occasion meant

administering bitter medicine to overcome economic challenges.22

Here Goh Chok Tong's words show the paternalistic nature of this 'soft'

authoritarianism.

Furthermore, the intervention by the Singapore government in the

economy is a success story despite the fact that it contradicts Wade, who in his

discussion of how to prevent poor countries getting poorer, prescribes the

integration of „the domestic economy more completely into the international

economy‟ and recommends the reduction of „interference‟ by governments in

markets.23 Hong Kong developed along these lines with a private enterprise

economy but suffered from a number of setbacks such as „the short term-horizon

decision makers‟ (risks for individuals was greater than that for society resulting

20

Pye, 'The New Asian Capitalism: A Political Portrait', p.83 21

See for example, The Government of Singapore, The Next Lap (Singapore: Times Editions Pte Ltd, 1991) 22

Kausikan, Bilahari., 'Governance that Works' in the Journal of Democracy (8.2, 1997) online 23

Wade, Governing the Market, p.5

12

in individuals reluctant to commit to long term investments), „inherent economic

distortions in the prices facing private decision-makers‟ (for instance, the market

cost of labour was above the true cost to society of additional employment which

meant there was too little labour employed. This could have been balanced by

government intervention and funding) and Externalities (the world market

questioned the quality of goods and received no governmental endorsement).24

Hence intervention, states Papanek, in South Korea, Taiwan, Japan and

Singapore is „quite justified‟ as their governments intervened 'to compensate for

distortions, not to aggravate them.'25 This idea of justification can be developed

further by looking at, 'neo-authoritarianism' a term coined by the Chinese which

describes a system where there is strict regulation of politics enabling stability for

free market economics. The choice raised by Heng, 'Give me liberty or give me

wealth' is answered by Singapore with neo-authoritarianism. South Korea and

Taiwan by contrast enjoy 'exhilarating new standards of democracy' but are

experiencing the realisation that 'political liberties seem to have an inverse

relationship with economic efficiency.'26

Ser states that 'business is our [Singapore's] lifeline but international

business is usually one in which governments do not play an active role (other

than regulation).'27 However, without the Singaporean governments

encouragement of what Papanek describes as 'massive foreign private

24

Papanek, 'The New Asian Capitalism: An Economic Portrait', p.38 25

Ibid, p.39 26

Heng, Russell., 'Give me liberty or give me wealth' in Da Cunha, Derek. (ed.), Debating Singapore (Singapore: Institute of Southeast Asian Studies, 1994) p.13 27

Ser, Toh Thian., Creating a new Urban elite for Singapore in Da Cunha, Derek. (ed.), Debating Singapore (Singapore: Institute of Southeast Asian Studies, 1994) p.152

13

investment'28, Singapore may have struggled to develop at the rate she did. This

suggests then that the school of thought that understands economic success to

be explained by the economic strategy of the country best explains the example

of Singapore. However, while not denying this, the Prime Minister, Goh Chok

Tong has also stressed Singapore's cultural impact on the economy and has

drawn attention to the economy's values, institutional structures and its social

relationships. In his 2003 National Day Rally Speech, Gog Chok Tong spoke of

the Singaporean people's courage, collective efforts and resourcefulness as

being paramount to Singapore's past and future success.29

28

Papanek, 'The New Asian Capitalism: An Economic Portrait', p.p.72-73 29

Minister Goh Choc Tong, 'National Day Rally Speech 2003'

14

2 : Framework

Lall defines the technological capability of a country as „the complex of

skills, experience, and effort that enables a country‟s enterprises to efficiently

buy, use, adapt, improve and create technologies.‟30 For successful technological

growth, there are a number of factors playing a role; Knowledge and Learning,

Technology Transfer and Research and Development.

Papanek considers the 'essence' of the 'successful East Asian model' to

be 'effective economic management', i.e. 'an efficient use of the resources of

those societies' and he views an effective development strategy to be 'one which

economises on the scarce resources, uses the abundant resource lavishly, and

rapidly increases the supply of scarce resources.31 These ideas are worth

bearing in mind when considering the following parts of this chapter.

2.1 Technological development and the importance of knowledge

and learning

Lall makes it clear that when considering the role of knowledge, one must

not fall into the trap of considering it to be a tangible product instead

remembering that „technological knowledge is difficult to locate, price, and 30

Lall, Sanjaya., „Technological Change and Industrialization in the Asian Newly Industrializing Economies: Achievements and Challenges‟ in Kim, Linsu. and Nelson, Richard R. (ed.'s) Technology, Learning, and Innovation (Cambridge, Cambridge University Press, 2000) p.14 31

Papanek, 'The New Asian Capitalism: An Economic Portrait', p.37

15

evaluate' and that 'its transfer cannot be wholly embodied in equipment or

instructions, patents, designs or blueprints.‟ Technical knowledge can be attained

through technological learning, which requires „conscious, purpositive, and

incremental efforts: to collect new information, try things out, create new skills

and operational routines, and strike new external relationships‟32 or be acquired

from the industrialized world through investment by Transnational corporations

(TNCs). Dent argues that in Singapore, TNCs dominate the economy.33 This part

of the chapter will look at the first of these methods of acquisition; part two

considers the second method and part three will discuss learning through

innovation, or research and development.

Learning can be identified as an organisational process within a business

firm. The repetition and experimentation of tasks enable those tasks to be

performed more quickly and at a higher standard. While learning requires

individual skills, it also requires suitable settings. The process is a social one

following either a pattern of imitation (or teaching) or a pattern of complex

problem solving in groups.34 Much of this kind of learning can be describes as

collective behaviour or collective learning. The sharing of resources and

knowledge can be unconscious acts done without or against the wishes of the

inventor. The Groupement Européen des Milieux Innovateurs (GREMI group)

indicates two requisites for collective learning; incontinuity and dynamic synergy.

32

Lall, „Technological Change and Industrialization in the Asian Newly Industrializing Economies: Achievements and Challenges‟, p.p.15 and 16 33

Dent, Christopher M., „Reconciling Multiple Economic Multilateralisms: The Case of Singapore‟ in Contemporary Southeast Asia (Volume 24, Number 1, April 2002) p.151 34

Teece, David J., 'Firm Capabilities and Economic Development: Implications for Newly Industrialising Economies' in Kim, Linsu. and Nelson, Richard R. (ed.'s), Technology, Learning, and Innovation (Cambridge, Cambridge University Press, 2000) p.111

16

Incontinuity relates to the accumulation of knowledge over time and dynamic

synergy is the transfer of knowledge through inter-SME linkages, spin-off

mechanisms and turnover of the labour force.35 This further highlights the need of

suitable locations, which incorporate proximity to other firms in a stable

environment. The Jurong region of Singapore is often referred to as the industrial

hub as this is where many projects such as the National Iron and Steel Mills,

Jurong Shipyard, National Grain Elevator and Sugar industries of Singapore

emerged and where today, much of Singapore's industry is based. Jurong can

therefore be argued to be a suitable location incorporating proximity to other

firms in a stable environment.

Konstadakopulos explains that collective learning „gives birth to creative

and continuous innovation‟ and is „a result of collective rather than co-operative

behaviour.‟ Co-operative behaviour is another important learning process that

implies „a voluntary participation of each actor in the creation of collaborative

learning, and the consequent exploitation of such activity for innovative activity.‟36

The distinction is small but significant as collective learning can be unconscious,

or at least accidental (for example, the hiring of an employee with greater

knowledge than originally realized).

According to the GREMI group, „economic space becomes a relational

space, in which actions through a synergetic and collective learning process

35

Konstadakopulos, Dimitrios., „Learning Behaviour and Co-operation of Small High Technology Firms in the ASEAN Region – Some Evidence from the Singapore-Johor Agglomeration‟ in ASEAN Economic Bulletin (Volume 17, Number 1, April 2000) p.49 36

Ibid, p.49

17

reduce uncertainties during changes in technological paradigms.‟37 The

importance of learning and knowledge is that change costs money and the firm

that evaluates the markets and technologies is better equipped to act accordingly

by adopting the best practice.38 Learning is often local and opportunities lie with

what is already familiar, Teece explains that this is because 'learning is often a

process of trial, feedback, and evaluation.' When there is a high level of change,

the quality of this process is weakened.39 Advances in technology also lead to

more scientific and professional workers being required. One job is taken away

and replaced by another, requiring a greater level of skill.40 Therefore, stability

can only ultimately result from balancing the fluctuations in the market and

continuously improving knowledge and learning.

The most important knowledge resides within people as this is where it

originates. Capabilities for technological knowledge and understanding in

Singapore are dealt with by the government. Kng et al. described the Singapore

government as developing 'the general productive potential of the work-force to

increase its absorptive capacity for specific technology at the enterprise level'

through 'basic general education' and 'basic industrial/vocational/professional

training' both 'from the primary to the tertiary levels.'41 Evidence of this can be

37

Ibid, p.49 38

Teece, 'Firm Capabilities and Economic Development: Implications for Newly Industrialising Economies', p.111 39

Ibid, p.113 40

Choy, Chong Li., 'Business in the Development of Singapore: The creation of an environment' in Choy, Chong Li., Huat, Tan Chwee., Chong, Wong Kwei. and Yeoh, Caroline. (eds), Business, Society and Development in Singapore (Singapore: Times Academic Press, 1990) p.89 41

Kng, Cheng Meng. (Principle Researcher), Low, Linda., Nga, Tay Boon., Tyabji, Amina., Effective Mechanisms for the Enhancement of Technology and Skills in Singapore (Singapore: ISEAS - The ASEAN Secretariat and Japan Institute of International Affairs in Collaboration with ASEAN Economic Research Unit, 1986) p.16

18

found at the Singapore Science Centre, whose mission is 'To promote interest,

learning & creativity in science & technology through imaginative & enjoyable

experience & contribute to the nation's development of its human resource.'42 At

the Science Centre, the 'Primary Science Activities Club' and 'Questa Club' are

run not only by the Singapore Science Centre and Science Teachers' Association

of Singapore but with the Singapore Association for the Advancement of Science

and the Singapore National Academy of Science. One activity within the 'Questa

Club' and aimed at secondary school students is the preparation of a report on

any area of science including biotechnology.43 This is clear evidence of the

Singaporean government training its citizens for success beyond the obvious

examples of school curriculum's and Singapore Polytechnic.

There has also been a clear development in educational styles which

reflect this governmental desire. Traditional teaching stressed 'analytical skills',

Chieh outlines these as learning to learn, creative thinking in practical workshops

(where idea generation, synthetic thought and other forms of creative thinking44

are taught) and a balance between academic and non-academic activities (such

as teamwork and motivation).

42

Seen on the plaque at the entrance to the Singapore Science Centre in Singapore. Viewed in January 2004. 43

Leaflets produced by the 'Primary Science Activities Club' and the 'Questa Club' on sale at the Singapore Science Centre. Purchased in January 2004. 44

Chieh makes it clear however that creative thinking is not a replacement to traditional analytical thinking but an addition to. Chieh, Hang Chang., 'What it takes to sustain Research and Development in a Small, Developed Nation in the 21

st Century' in Low, Linda. (ed.), Singapore –

Towards a Developed Status (Oxford: Oxford University Press, 1999) p.32 I had personal experience of this kind of learning when I was asked by a student from Nanyang Business School-Nanyang Technological School to complete a survey. He was considering the responsibility factor of building a chemical factory in the vicinity of a housing project. Traditional teaching focused on the subject of economics and business, more recent teaching encourages students to explore the sociological and ethical issues as well. By considering wider implications through broadening the opportunity to think about the connectivity of theory and reality for citizens, the leaders of tomorrow will be more responsible planners and more innovative thinkers.

19

2.2 Technology transfer

Konstadakopulos noted in 2000, that during the previous twenty years, the

majority of ASEAN countries had seen their intervention-orientated industrial

policies bring them great success despite the financial crisis of 1997. He

considered one of the most important achievements to have been „their ability to

attract TNCs and a large number of foreign direct investments in high technology

sectors.‟ Substantial transfer of technology by FDI, he believed, contributed to

the industrialisation of Singapore, Malaysia and Thailand.45

Technology transfer does not mean the acquiring of machines but the

gaining of knowledge for the operating, maintaining, adapting and developing of

the machines. Such a transfer may be measured by levels of technology used,

levels of understanding with regard to operating, maintaining, adapting and

developing of the machines and the subsequent diffusion of such knowledge to

linked enterprises.46 It is important to make clear the distinction between

technology transfer from the North to the South47 and transfer between or within

firms in NIEs. Teece notes that while knowledge and learning increase and

improve through the transfer of knowledge through inter-SME linkages, spin-off

mechanisms and turnover of the labour force, many managers discuss a 'crown

jewels' metaphor, believing that if their technology is released, the kingdom will

45

Konstadakopulos, „Learning Behaviour and Co-operation of Small High Technology Firms in the ASEAN Region – Some Evidence from the Singapore-Johor Agglomeration‟, p.50 46

Kng et al., Effective Mechanisms for the Enhancement of Technology and Skills in Singapore, p.16 47

Equally, this could be described as west to East, Developed to Developing but for simplicity, North to South will be used throughout this dissertation.

20

be lost. Here the role of government is highlighted, a firm's technological assets

may or may not be protected under intellectual property law48, and it is the

responsibility of a government to protect its firms and hence encourage

technology transfer within the country.

Technology transfer in human skills can also be provided by firms through

'on-the-job training, in-house courses and overseas training with parent or other

related companies.' In Singapore, these programs are government funded.49 The

Singapore government also actively sought investment from foreign firms.

Phillips and Yeung account for the purpose of the Singapore Science Park as 'a

specific state-driven exercise to bring R&D to Singapore.'50 The science park was

also hoped to encourage transfers between firms' thus increasing knowledge and

resulting in technological growth.

When considering transfers of information to Singapore, one must not

overlook the United Nation Development Programme (UNDP) which in Singapore

was led by Dr Albert Winsemus and was influential to the degree that Boey et al.

believe that without the UNDP, Singapore would not have achieved success. The

UNDP encouraged and enabled institutions such as the National Productivity

Board (NPB) to develop successfully. The NBP Automation and Technology

48

Teece, 'Firm Capabilities and Economic Development: Implications for Newly Industrialising Economies', p.112 49

Kng et al., Effective Mechanisms for the Enhancement of Technology and Skills in Singapore, p.16 50

Phillips, Su-Ann Mae. and Yeung, Henry Wai-Cheung., „A Place for R&D? The Singapore Science Park‟ in Urban Studies (Volume 40, Number 4, July 2002) p.714

21

Services Unit developed the card key used throughout the world to save energy

in hotels, facilitated by initial support from the UNDP.51

2.3 Research and development

Early technology transfer (characterised as skill or capital intensive) was

often inappropriate for countries with high workforces and limited capital. The

widespread belief, emerging after World War II, that Western technology could

be exported to benefit Less Developed Countries (LDCs) was soon shown to be

misguided and the view that the LDCs needed to develop science and

technology for themselves emerged.52 However, Research and development

(R&D) in Singapore was limited by manufacturing being dominated by

multinational corporations (MNCs) who conducted R&D at headquarters in their

home countries. This was compounded by R&D in Singapore being a low

government priority and until the late 1970s, being conducted on an ad hoc

basis. Industrial growth fuelled by cheap labour further set R&D back in the

priority list.53

Singapore has since attempted to rebalance the situation and the

government invested in the National University of Singapore and the Singapore

51

Boey, Chow Kit., Leen, Chew Moh. and Su, Elizabeth, One Partnership in Development – UNDP and Singapore (Singapore: United Nations Association of Singapore, 1997) p.p.19, 112 and 39 52

Pack, Howard., 'Research and Development in the Industrial Development Process' in Kim, Linsu. and Nelson, Richard R. (ed.'s), Technology, Learning, and Innovation (Cambridge: Cambridge University Press, 2000) p.69 53

Kng et al., Effective Mechanisms for the Enhancement of Technology and Skills in Singapore, p.23

22

Science Park. It is noteworthy that Phillips and Yeung have examined the myth

that 'spatial proximity to R&D institutions and organisations automatically results

in collaborative R&D efforts' and conclude that the example of Singapore is one

of 'little more than a form of glorified property development.' Phillips and Yeung

describe the Singapore Science Park as 'a specific state-driven exercise to bring

R&D to Singapore‟ but cite The Straits Times as saying that 'it would be a

mistake to expect a certain output of high-tech entrepreneurs in a predictable,

mechanistic manner, just because there has been so much investment, facilities

and people put into the effort.'54

What really fuels R&D is people. Ser painted a negative picture of

Singapore when he claimed that 'Singapore has only a handful of home-grown,

private sector entrepreneurs with the ambition and funds for major international

expansion.'55 However, certain incentives that offset perceived risk can

encourage people to expand their R&D. The Singapore government allows

approved companies to put aside twenty per cent of their taxable income as an

R&D reserve (which is tax exempt if spent within three years) and certain

companies receive a fifty per cent investment allowance on capital expenditure

and double deduction on their operating expenses.56

The Organisation for Economic Cooperation and Development (OECD)

describes Singapore as 'a more advanced developing nation', not a mere

developing nation but not quite developed since, Chieh explains, 'its indigenous

54

Phillips and Yeung, „A Place for R&D? The Singapore Science Park‟, p.p.707, 710, 714 and 717 55

Ser, 'Creating a new urban élite for Singapore', p.153 56

Choy, 'Business in the Development of Singapore: The creation of an environment', p.9

23

technological capability generally still lacks depth and maturity.'57 As Singapore

lacks natural resources,58 Chieh explains that Singapore 'wisely' chose to

develop in 'selected areas of technology.' This was to 'maintain the

Manufacturing sectors share of GDP at a high level well into the 21st century' and

ensure 'healthy growth of the service sector through technology applications.'

The National Science and Technology Board (NSTB) was established in 1991 to

'spearhead the rapid development of indigenous science and engineering

capabilities essential for the development of technology infrastructure.'59

Expenditure on R&D rose from 0.55% of GDP in 1984 to about 1% in

198860 but it was still only 1.35% of GDP in 1997 (against a benchmark for R&D

success of 2% of GDP). The number of Research Scientists and Engineers

(RSEs) were 56 per 10,000 people (in the workforce) in Singapore against the

benchmark of 70 RSEs per 10,000. As a result, The National Science and

Technology Plan (NSTP) of 2000 set out to increase R&D expenditure to 16% of

GDP and the number of RSEs to 65 per 10,000 people. This was to be

government led and funded.61

The 2000 National Survey of R&D in Singapore reported that the number

of RSEs per 10,000 had been 69.9 but the benchmark was jumped and left far

57

Cheih, 'What it takes to sustain Research and Development in a small, Developed Nation in the 21

st Century', p.25

58 The National Geographic Society states that seafood is the (only) natural resource of

Singapore. National Geographic, The National Geographic Desk Reference (Washington: Stonesong Press, 1999) p.631 59

Cheih, 'What it takes to sustain Research and Development in a small, Developed Nation in the

21st Century', p.25

60 Milne, R. S. and Mauzy, Diane K., Singapore: The Legacy of Lee Kuan Yew (Boulder, San

Francisco & Oxford: Westview Press, 1990) p.141 61

Cheih, 'What it takes to sustain Research and Development in a small, Developed Nation in the 21

st Century', p.p.26-27

24

below when in 2000, the number rose to 83.5%.62 GDP also rose, from 1.87% of

GDP in 1999 to 1.89% of GDP in 2000.63 This was still below the benchmark.

The importance of these statistics depend upon the theoretical viewpoint taken. If

the benchmarks for R&D growth as outlined above are accepted then the

viewpoint suggests that Singapore exceeds the requirement for number of RSEs

and is approaching the requirement of GDP (also called GERD or Gross

Expenditure on R&D) spending. However, Chieh argues that in a country as

small and newly developed as Singapore, the total of RSEs is not attractive

enough to be sufficiently attractive. The new countries need to make up for lost

time and Chieh suggests that a figure closer to 100 RSEs per 10,00064 (or 1%) is

more appropriate. Singapore when considered in this way is particularly in need

of a high number of RSEs per 10,000 as the total population is a tiny 4 million.

1% of 4 million may still be too small to attract MNCs to set up foreign R&D sites.

2.4 Summary

Low states that 'the government wishes to … be a technology broker'65

and Konstadakopulos shows this when he explains that in Singapore „policies are

62

It must be noted that this increase is in part attributable to the inclusion of research-based postgraduate students as part of the RSE headcount. A-Star makes it clear, however, that this was in line with RSE definitions and allows for comparison with other countries. A-Star, 'Year 2000 National Survey of R&D in Singapore', www.a-star.edu.sg.astar/front/media/content_uploads/1452_311_R&D_202000.pdf, Accessed 13/03/04 63

Ibid 64

Cheih, 'What it takes to sustain Research and Development in a small, Developed Nation in the 21

st Century', p.29

65 Low, Linda., 'Singapore: Towards a Developed Country Status' in Low, Linda. (ed.), Singapore

– Towards a Developed Status (Oxford: Oxford University Press, 1999) p.7

25

aimed toward research and development and technology transfer, development

of strategic industries, encouraging the formation of industrial clusters and

pursuing regional networking activities.' The degree to which the government can

be seen to be doing this is evident in the 'strong emphasis on vocational courses

directed towards company needs, particularly for high technology TNCs' and the

adoption of 'policies for the development, adaptation and retraining of their

workforce.‟66

Konstadakopulos argues that Singapore could form an innovative milieu

with the Malaysian State of Johor and states that despite limited research into

learning behaviours and knowledge transfer interchanges at the intra-regional

level, growing integration and globalisation has heightened both academic and

business interest in the changing 'conditions and characters of innovation.' The

requisites for such a milieu are clear.

Linkages with firms from outside the milieu, which provide external

knowledge and external learning to the local technological trajectory, are

paramount. Therefore, strategic alliances and knowledge transfers

between ASEAN SMEs, foreign SMEs and transnational corporations

(TNCs) are very important.67

Therefore, technological knowledge and learning require external input, in the

form of technology transfer. R&D is also very important for a country to be at the

cutting edge of technology although Chieh states that it should be noted that 'the

emphasis for R&D for technological innovations does not imply a diminishing role

66

Konstadakopulos, „Learning Behaviour and Co-operation of Small High Technology Firms in the ASEAN Region – Some Evidence from the Singapore-Johor Agglomeration‟, p.50 67

Ibid, p.49

26

for 'acquired technology' through purchase of sophisticated technology and

equipment,' and argues that to the contrary 'acquired technology will continue to

be as important as direct R&D for both developed and developing nations in the

21st century.'68

68

Cheih, 'What it takes to sustain Research and Development in a small, Developed Nation in the 21

st Century', p.31

27

3 : How is Singapore different?

Like Hong Kong, Singapore is a small city-state with neither significant

land nor resources. It began its economic life in 1843 as a British colony playing

the role of a regional entrepôt, was granted self-government in 1959 and became

an independent nation with a parliamentary form of government six years later.69

There are a number of key differences between Singapore and the other East

Asian NIEs with regard to technological growth which are laid out in the first part

of this chapter, but it is the Singapore government and its relationship with the

market and private sector that makes Singapore truly unique and this issue is the

focus of this chapter.

3.1 Why is it worth studying over other NIEs?

The transition of Singapore from 'a semi-peripheral to a more central

position on the world stage' is, believes Margolin, 'characterised by a significant

increase in all kinds of flows passing through it: goods, capital, people, and

knowledge and ideas.‟70 Fong argues that these flows are due to Singapore

being 'open and outward-looking.' Fong describes Singapore as being 'committed

to free trade, receptive to foreign ideas and technology, and attuned to changes

69

Fong, Pang Eng., „The Distinctive Features of Two City-States‟ Development: Hong Kong and Singapore‟ in Peter L. Berger and Hsin-Huang Michael Hsiao (eds) „In Search of an East Asian Development Model‟ (Oxford, Transaction Books, 1988) p.220 70

Margolin, Jean-Louis., „Singapore: New Regional Influence, New world Outlook?‟ in Contemporary Southeast Asia (Volume 20, Number 3, December 1998) p.327

28

in regional and international economic conditions.‟71 This view was verbalised on

the 16th of April 1984, in a speech titled „Security options for small states‟, given

by the Political Secretary in the Ministry of Defence, Lee Hsien Loong. Loong

said 'Nations are not created equal, any more than animals are. In the

international jungle, justice and righteousness are concepts which are edifying,

resonant but inoperative. The game is survival and the stakes are life and

death.'72

This fighter attitude means that despite its small size, Singapore maintains

a high profile foreign economic policy (FEP). Singapore necessarily recognises

its dependence on the international economic system having healthy

development and maintained stability. As a result, multilateral economic

governance is given particular priority as it fosters that development and

stability.73 The importance of multinational enterprises (MNEs) in Singapore's

economy accounts in part for Singapore's FEP. Promotional agencies such as

the Economic Development Board and Trade Development Board facilitate

businesses both from Singapore and abroad74 with the government dealing with

businesses solely on merit with no favoured treatment for local companies or

government-linked companies (GLCs).75 The Singapore government invests

large amounts in order to increase the country's attractiveness to investors,

particularly in areas where public investment is low, for example. Infrastructure

71

Fong, „The Distinctive Features of Two City-States‟ Development: Hong Kong and Singapore‟ p.p.220-221 72

Margolin, „Singapore: New Regional Influence, New world Outlook?‟, p.322 73

Dent, „Reconciling Multiple Economic Multilateralisms: The Case of Singapore‟, p.p.146-147 74

Ministry of Trade and Industry (Singapore), 'Facilitating Businesses', www.mti.gov.sg/public/ECM/frm_ECM_Default.asp?sid=22&cid=61, Accessed 14/12/03 75

Ministry of Trade and Industry (Singapore), 'Providing the Legislative Framework', www.mti.gov.sg/public/ECM/frm_ECM_Default.asp?sid=22, Accessed 14/12/03

29

and manpower.76 These services are provided by statutory boards, which Asher

describes as 'autonomous organisations set up by specific Acts of Parliament' to

provide 'almost all infrastructural, promotional, and public utility services.' GLCs

complement the statutory boards and are in turn owned by Tamasek Holdings,

Singapore Technologies and Ministry of National Development (MND) Holdings

and Sheng-Li Holding Company; and are controlled by small numbers of

individuals.77 The government's participation was aimed at stimulating

industrialisation, restructuring the economy and generating government

revenue.78 This issue is a key characteristic of Singapore and makes it a

fascinating area of study. The topic is discussed with case studies in chapter

four.

Another key area where the Singapore government has effected

technological growth is through the 1979 change in wage restraint. Until the late

1970s, Singapore had a policy of wage restrain which aimed to encourage

growth in labour-intensive industries and keep costs of production within

reasonable limits. This was successful until 1979 when in all sectors of the

economy, labour shortages became apparent leading to a demand for foreign

workers. The government stimulated a second industrial revolution when the

National Wages Council (NWC) revised its policy of keeping wages down and

76

Ministry of Trade and Industry (Singapore), 'Providing a Stable Environment for Businesses, www.mti.gov.sg/public/ECM/frm_ECM_Default.asp?sid=22&cid=59, Accessed 14/12/03 77

Asher, Mukul G., 'Some Aspects of Role of State in Singapore' (first published in 1994 in Economic and Political Weekly, 29:14 p.p.795-804) in Rodan, Garry. (ed.), Singapore (Hants: Ashgate Publishing Limited, 2001)p.15 78

Choy, 'Business in the Development of Singapore: The creation of an environment', p.7

30

decided to raise wages in order to force the pace of technological change (i.e. a

move to less labour-intensive methods of production).79

Further wage increases followed the introduction of the 'flexiwage' system.

An 8% increase in wages in 1988 correlated to the introduction of this system

which featured wages made up from four components; basic wage (according to

the value of the job), a 2% service increment, an annual supplement (to the value

of one months wages) and a variable performance bonus (which Milne and

Mauzy state made up half of the 1998 wage increase). Union pressure, linked to

a high demand for labour called for greater flexibility in the arrangement and

once again the level of skill increased as the quality of labour could replace

quantity.80

Currently the NWC is proposing a series of cost-cutting measures to

protect the financial interests of some SARS (Severe Acute Respiratory

Syndrome) affected companies. These include the shortening of the working

week, temporary lay-offs and the arrangement to workers to take leave or under

go government provided (through the Ministry of Manpower and other agencies)

skills training. If these measures are ineffective there will be wage-cuts. The

NWC says that it believes the difficult year will be survived due to strong tripartite

cooperation between employers, trade unions and of course, the government.81

Like the other NIEs, Singapore has neither advanced industrialised

country (AIC) status nor is it a less developed country (LDC). Instead Singapore

79

Choy, 'Business in the Development of Singapore: The creation of an environment', p.p.7-8 80

Milne, and Mauzy, Singapore: The Legacy of Lee Kuan Yew, p.140 81

National Wages Council, 'National Wages Council (NWC) wage guidelines for July 2003 to June 2004', www.channelnewsasia.com/wages/030521_nwc.htm, Accessed 13/03/04

31

described as having a semi-peripheral context as it sits between the core AICs

and periphery LDCs.82 However, Singapore is different from the other NIEs with

regard to its domestic savings, the rates of which are one of the highest in the

world. About twenty per cent of salaries are contributed to the CPF resulting in

Singapore's reserves being higher than those of many much larger countries.

Huen states that 'the correlation between savings, investment and economic

growth is well understood' and as a result 'Singapore maintains a strong guard

over its hard-earned reserves.'83

This strong guard was witnessed during the 1985-1985 recession when

the government took measures to deal with the recession which included wage

restraint and 'cuts in taxes, employer's CPF [Central Provident Fund]

contributions (from 25 percent to 10 percent of an employee's wage or salary)

and statutory board charges.'84 Some measures were easier to implement that

others but the key issue reflected by the treatment of the recession was the

government's commitment to protect its economy and people, the cut in wages

for example was seen as a last resort 'partly because it might be regarded as

diminishing workers' savings and making it more difficult for them to become

homeowners.'85

Singapore's trade is equally impressive in its multi-orientated nature which

avoids reliance on any single partner.86 This policy has clearly worked, as by

82

Dent, Christopher M., „Singapore‟s Foreign Economic Policy: The Pursuit of Economic Security‟ in Contemporary Southeast Asia (Volume 23, Number 1, April 2001) p.3 83

Huen, P. Lim Pui., 'Frugality jockeys with conspicuous consumption' in Derek Da Cunha (ed), Debating Singapore (Singapore: Institute of Southeast Asian Studies, 1994) p.78 84

Milne, and Mauzy, Singapore: The Legacy of Lee Kuan Yew, p.142 85

Ibid, p.142 86

Margolin, „Singapore: New Regional Influence, New world Outlook?‟, p.323

32

1998 Singapore had more than 2% of the world's trade (more than India).87

Galbraith states that Singapore, along with Hong Kong, has shown land to be

'wholly irrelevant.'88

Singapore hoped sustained her early economic growth by developing

corporate networking. Networking is a particular skill of Singaporeans89 and

developing it large scale is making good use of what the government calls its

most precious resource, its people.90 Four new concepts were outlined by

Mahizhnan in 1991; the Fusion concept (where 'local enterprises are encouraged

to form a coalition of strategic partners that will develop, produce and market

products that members are not likely to have done individually), the Singapore

International Foundation (SIF) network (which since 1991 has been building up

'an extensive network of Singapore-related people and organizations abroad'

which can 'provide a valuable entry to foreign business opportunities for

Singaporeans and Singapore opportunities for foreigners'), Diaspora networks

(which use ethnic ties, particularly Chinese) and Flexible consortium (based on

kieretsu which vertically 'comprises suppliers and retailers under a large industry-

specific firm' and horizontally 'comprises companies from different industries.').

The fourth example is flexible and vertically or horizontally integrated because

Singaporean entrepreneurs prefer being their own boss and having ultimate

decision-making powers, it is good for consortium members to conduct business

87

Margolin, „Singapore: New Regional Influence, New world Outlook?‟, p.319 88

Galbraith, „The World Economy Since the Wars – A Personal View‟, p.13 89

Whilst in Singapore, several of the students gave me their business cards. These cards were produced by the National University of Singapore and gave the students subject area and level of study as well as their personal details. For one student, creating a network between us was particularly important as she was planning to study for a PhD at my own university, Durham University. 90

The Government of Singapore, The Next Lap, p.19

33

with non-consortium members and even competitors of consortium members, the

consortium itself should remain flexible by not guaranteeing member business

that is not competitive and this approach avoids accusations of being

protectionist against foreign competitors or of developing monopolies. 91

Milne and Mauzy summarise the above points that reflect why Singapore

is worth studying over NIEs:

The state has been active through a host of statutory boards that

promoted economic development and social welfare, such as the EDB,

HDB, and CPF Board. The state has provided radio, television, health,

and education services and has engaged in commercial operations,

including Singapore Airlines, a state trading company, a state investment

corporation, the Post Office Savings Bank, and perhaps five hundred

wholly or partly owned companies. The government has also exercised

controls through the NWC and the Employment Act and the Industrial

Relations Act, to say nothing of its use of a whole range of financial

incentives.'92

All of these reasons show Singapore to be a largely created state, a situation

unusual enough to warrant a great interest in it.

3.2 The government/private sector balance

91

Mahizhnan, Arun., Corporate networking: where to next? in Derek Da Cunha (ed), Debating Singapore (Singapore: Institute of Southeast Asian Studies, 1994) p.p.147-151 92

Milne, and Mauzy, Singapore: The Legacy of Lee Kuan Yew, p.143

34

Wah suggests that Singaporean creativity is withering away as Kiasuism,

the trend of seeking what others seek in the name of security. Blame can be

attributed to government provision of good housing, education, transportation

and health care. Young people lack big dreams and wish to emulate rich

bankers, lawyers and doctors. Wah suggests that too many people put too much

value on the same narrow range of goods – material goods. Pressure to conform

is high and opting out is risk-laden. Kiasuism is used 'to persuade people to

achieve economic and social objectives,' it is reinforced as the state's goals are

achieved – state support ameliorates risks as 'people are told not to miss

opportunities for making money.'93

The presence of the government in Singapore in many aspects of life

cannot be underestimated. Chong describes 'the austerity and discipline of a

political economy of authoritarian corporatism' as accounting for Singapore‟s

original success but Dent explains that the governments own concept of

'Singapore Inc.' is based on an inclusive team-working approach. Stakeholders94

work together as if in a large corporation with each cooperating with the others to

support and add value to their business partners. 95

The People's Association is a good example of cooperation between

groups of people. The People's Association, 'Together, towards an active

community', has five core values: 'Respect for one another', 'Opportunities for all',

93

Wah, David Chan Kum., Kiasuism and the withering away of Singaporean creativity in Derek Da Cunha (ed), Debating Singapore (Singapore: Institute of Southeast Asian Studies, 1994) p.p.71-75 94

'Political leaders and government, institutions and academia, chambers of commerce and trade associations, industrialists and labour, foreign investors and local companies, [and] the people.' Dent, „Reconciling Multiple Economic Multilateralisms: The Case of Singapore‟, p.160 95

Ibid, p.160

35

'Progress with creativity', Effectiveness and efficiency' and 'Service from the

heart.' Its mission, as realised through various meetings and courses, is 'To

promote active citizenship and multiracial harmony', 'To provide affordable

access to lifeskill and lifestyle activities', 'To connect the citizens for community

bonding and volunteer work' and 'To bring the people closer to each other and to

the government.'96

'Nevertheless, organized civil society in Singapore is not really that

independent from the government, has very little limited contesting influence in

general, and is essentially subservient to the developmental mindset of the state.

In sum, Singapore‟s “people sector” comprises spontaneous civil society and

state-initiated voluntary organisations. The somewhat oxymoronically termed

“state-related NGOs” fall into this latter category, for example, the Singapore

Environment Council (SEC), and National Trade Union Congress (NTUC), whilst

the former remain far more marginalised within Singapore polity. An important

corollary of this is that the primary role of domestic societal stakeholders in FEP

formation is significantly state-mediated, and is more affirmative rather than

influential in nature.‟ 97

The current issue in Singapore regarding the government/private sector

balance is privatisation. The 1986 report of the Economic Committee was

established to determine the cause or causes of the show-down in growth98 and

to provide recommendations for new directions for the Singaporean economy.

The cause was highlighted as the stifling of entrepreneurship by GLCs, the

96

White Pages: Business - Singapore Phone Book (Singapore: 2003/2004) p.108 97

Dent, „Reconciling Multiple Economic Multilateralisms: The Case of Singapore‟, p.160 98

Reflected by the recession of 1985-86

36

recommendations therefore were privatisation and the encouragement of private

sector initiative. Booth's view is that privatisation is an 'odd' solution to a lack of

entrepreurship, the revenues created by privatisation are not needed and

therefore 'why … tamper with what are obviously well-managed and efficient

public utilities … ?'99

Privatisation has been considered differently by Asher who describes the

Singapore Government as having a privatisation programme ('spelled out in a

1987 Report of the Divestment Committee') that makes its role stronger and

more extensive as it frees money for the government (which as stated earlier, the

government does not need) meaning the government can invest elsewhere.

Privatisation is then seen as a flexible tool that holds benefits for both the public

and private sector. In many cases, such as with Singapore Telecom and

Singapore Airlines, divestment is only partial, providing the government with the

best of both situations: control and money to invest elsewhere.100

99

Booth, Anne., 'Privatisation may not be the best answer' in Da Cunha, Derek. (ed.), Debating Singapore (Singapore: Institute of Southeast Asian Studies, 1994) p.p.158-159 100

Asher, 'Some Aspects of Role of State in Singapore', p.15

37

4 : GLC case studies

In the early days of Singapore's industrialisation the government invested

in joint ventures to attract strategic industries. Many of the projects emerged in

the Jurong industrial estates and included the National Iron and Steel Mills,

Jurong Shipyard, National Grain Elevator and Sugar industries of Singapore.

Today, most of the large locally-owned enterprises in Singapore are government

controlled.101 These include the Port of Singapore Corporation Limited (PSA),

Singapore Telecommunications (SingTel) and Singapore Airlines (SIA), the

subjects of the case studies in this chapter. The three GLCs are all maintained by

Temasek Holdings, one of Singapore's statutory boards.

4.1 Temasek Holdings

Statutory boards were described in chapter three as 'autonomous

organisations set up by specific Acts of Parliament' to provide 'almost all

infrastructural, promotional, and public utility services.' The three boards

mentioned; Tamasek Holdings, Singapore Technologies and Ministry of National

Development (MND) Holdings and Sheng-Li Holding Company, care for the

101

Perry, Martin., Kong, Lily. and Yeoh, Brenda., Singapore: A Developed City State (Chichester, New York, Weinheim, Brisbane, Singapore, Toronto: John Wiley & Sons, 1997) p.126

38

companies linked to the government. Temasek is the largest holding company102

and, as mentioned above, maintains PSA, Singtel and SIA.

The Temasek Charter states that 'Temasek Holdings holds and manages

the Singapore Government's investments in companies, for the long term benefit

of Singapore.' The Charter states that Temasek will help to 'broaden and deepen

Singapore's economic base' by 'nurturing successful and vibrant international

businesses', divesting businesses which are 'no longer relevant or have no

international growth potential' and investing in new businesses ('in order to

nurture new industry clusters in Singapore'). Temasek states that it works with its

companies to:103

(a) Values

Promote and maintain a strong culture of integrity, meritocracy,

excellence and innovation;

(b) Focus

Foster a strong focus on core competence, value creation, customer

fulfilment and shareholder returns; and divest non-core businesses, so

as to maximise long-term shareholder benefit;

(c) Human Capital

Nurture and cultivate a strong and internationally competitive cadre of

board and management leadership, as well as outstanding employees

to build successful businesses;

102

Milne and Mauzy, Singapore: The Legacy of Lee Kuan Yew, p.144 103

The points will be referred to below by the corresponding letter. Not every aspect of a point,

nor every point, will be highlighted and discussed. The most relevant points or parts of points may be cited only. This does not imply that the other parts of the point are not also relevant, just that the cited material is most relevant.

39

(d) Sustainable Growth

Support and institutionalise high standards of business leadership,

financial discipline, operational excellence and corporate governance

to achieve scalable and sustainable growth; and

(e) Strategic Development

Shape strategic developments, including consolidations, mergers,

acquisitions, rationalisation or collaborations as appropriate, to build

significant international or regional businesses.104

The three GLCs considered below are evaluated with regard their technological

growth (using the conclusions made in chapter two) against the government and

market debate (referring to the Temasek objectives outlined above).

4.2 The Port of Singapore Authority

Prior to 1945, Singapore's port was seen as attractive due to the laissez

faire policy of the British which maintained a free port and free trade, which

contrasted sharply with the regulations and controls of Dutch colonial ports. Deep

sheltered water had led to the development of Keppel Harbour in 1879 which in

1905 came under control of the British government through the expropriated

Tanjong Pagar Dock Company who became known as the Tanjong Pagar Dock

104

Temasek Holdings, 'Temasek announces New Charter: Temasek Charter', www.temasek.com.sg/temasek_news/new_release/03_07_2002.htm, Issued 03/07/02, Accessed 13/03/04

40

Board. In 1912, under the Straits Settlements Port Ordinance, the Singapore

Harbour Board (SHB) was constituted and was established the following year.

Upgrading of the port began in 1959 and The First Development Plan of

Singapore (1961-64) identified the need for industrialisation. The first chairman of

the port made clear the importance of the port to Singapore's technological

growth when he said 'As Singapore's industrialisation programme continues to

grow, the parallel growth of the port and its services and facilities will continue to

involves it as an inseparable partner of the country's progress.'105

In 1964, under the 1963 Port of Singapore Authority Act, the Port of

Singapore Authority (PSA) was established. The PSA was the result of a study

made in 1960 that considered the rationalisation of the SHB, Maritime

Department and Marine Branch of the Public Works Department. The PSA

gained authority over the functions that had been carried out by these three

organisations.

The PSA's regulatory functions were handed over to the Maritime and Port

Authority in 1996 and PSA Corporation Limited (PSA) was subsequently

incorporated in 1997 to succeed the Port of Singapore Authority in its

management and operation of its terminals and related business. PSA

International (PSAI) became the PSA's investment holding company for business

in Singapore and world-wide in 2003.106

105

Sien, Chia Lin, 'The Port of Singapore' in Sandhu, Kernial Singh. and Wheatley, Paul. (ed.'s), Management of Success: The Moulding of Modern Singapore (Singapore: Institute of Southeast Asian Studies, 1989) p.p.317-318 106

PSA, 'Welcome to Investor Relations', www.internationalpsa.com, Accessed 13/03/02

41

PSA is highlighted as an example here as the company provided the

foundations for Singapore's development. PSA is also interesting because it has

developed its technology through the three principles laid down in chapter two;

knowledge and learning, technology transfer and R&D as well as achieving

governmental goals as expressed through Temasek Holdings.

PSA states that 'PSA works closely with over 200 of the world's shipping

lines, using our collective skills, knowledge and experience to anticipate our

customers' every need and deliver even more' and new knowledge is pursued,

as PSA 'constantly seek innovative ways to create value for our customers and

help them boost productivity.' PSA also places great emphasis on staff training

for which it was accorded numerous awards for people development. Training

road maps are customised for employees so they can continually upgrade their

skills and serve the customer better.'107

Technology transfer operates through the transfer of people and PSA

explains that it is able to 'draw on its global talent pool in business development,

operations, marketing, human resource, finance, engineering and IT and tap into

the resources of the entire Group for deployment to any of our ports around the

world.108

R&D has also played a key role in PSA's development. For 30 years, PSA

has 'continuously developed and upgraded its container handling infrastructure,

pioneered new systems and streamlined operations to meet the rapid growth in

its container terminal business.' Its Singapore terminal handles a fifth of the

107

Ibid 108

Ibid

42

world's transhipped containers (over 18 million TEUs a year). PSA explain that

'managing, moving and tracking such huge numbers of containers is an

immensely complex operation' an operation that is only successful because 'PSA

has the tested and proven systems of technology to keep operations running

smoothly and efficiently, 24 hours a day.' This testing of systems to ensure

excellence has led to innovation:

Harnessing the latest in automation, wireless communications, information

technology and operations research, PSA combined its extensive domain

knowledge in container operations with new technologies and innovated

CITOS (Computer Integrated Terminal Operations Systems) and

PORTNET, setting a new benchmark for connectivity, efficiency, speed

and reliability for mega-hub operations. 109

Such innovation arguably pays off as 'PSA's investment in technological

innovation results in consistent service excellence that our customers can rely on

in any port where we operate.' The company boasts that 'our dedicated

operations team constantly develops solutions to work harder for our customers,

so that they enjoy the benefits of faster, more reliable and more cost effective

processes.'110

These aspects that lead to technological development encompass (a)

(excellence and innovation), (b) (customer fulfilment), (c) (Nurture and cultivate

109

Ibid 110

Ibid

43

… outstanding employees), (d) (operational excellence) and (e) (build significant

international … businesses) of Temasek's Charter.111

It can therefore be deduced that the government influences PSA.

However, this may not be a valid argument as Temasek's Charter differs little

from a Charter for a company governed by market forces.

4.3 Singtel

In 1879, Mr Bennet Pell started a private telephone exchange in

Singapore with just 50 lines. The British managed Singapore's telephone

services until 1955 when the Singapore Telephone Board (STB) was

incorporated into a statutory board with exclusive rights to operate telephone

services in Singapore. The STB dealt with local calls and the

Telecommunications Authority of Singapore (TAS) dealt with international calls

until 1974 when the two merged. There was another merger in 1982 when the

Postal Department joined Singapore Telecoms (SingTel).112

SingTel expanded overseas in 1988 with the formation of Singapore

Telecom International and became corporate in 1992; this was followed by its

Initial Public Offering (IPO) in 1993. SingTel states that it is still Singapore's

largest ever IPO. In 2000, Singapore's telecoms market became fully liberalised

111

Temasek Holdings, 'Temasek announces New Charter: Temasek Charter' 112

SingTel. 'History and Milestones', http://home.singtel.com/about_singtel/company_profile/milestones/companypro_milestones.asp, Accessed 13/03/02

44

but SingTel is still the market leader with just under 2 million lines.113 The

impressive thing about SingTel is that despite having a small domestic market,

the company is a major player in Australia. Goh Chok Tong cites the company as

evidence of Singaporean resourcefulness.114

SingTel has 31 offices in 15 countries across the world. Within each of

these offices are 'experienced and well-qualified local professionals' who

'understand the respective telecommunications environments and are familiar

with local regulations and procedures.' SingTel describes this 'in-country

knowledge' as critical to maintain SingTel as a 'one-stop shop

telecommunications provider that can best meet the demands of its

customers.'115

SingTel has transferred its technology across the world and 68% of its

business does not come from Singapore.116 It has also developed new products

in order to compete successfully on the global market, these include SingTel

Mobile, NCS Pte Ltd (an information technology and communications

engineering provider), SingNet (Singapore's leading internet provider).117 SingTel

has a positive image for development in its symbol:

113

SingTel. 'History and Milestones' 114

Prime Minister Goh Choc Tong, 'National Day Rally Speech 2003' 115

SingTel, 'Global Presence: Overseas Offices', http://home.singtel.com/about_singtel/global_presence/globalpre_overseasoffices.asp, Accessed 13/03/04 116

SingTel, 'Global Presence: Overseas Investments', http://home.singtel.com/about_singtel/global_presence/overseas_investments.asp, Accessed 13/03/04 117

SingTel, 'Subsidiaries & Associated Companies', http://home.singtel.com/about_singtel/subsidiaries_n_associated_companies/subsidiariesjoint_subsidiaries.asp, Accessed 13/03/04

45

The SingTel symbol consists of an ellipse and two squares. The ellipse

shows that SingTel is in the global network. It also represents SingTel's

increasingly active role in international activities. The squares represent

the modern and advanced technology used in the telecommunications

business.118

SingTel's attitude is clearly one of innovative thinking.

Like PSA, SingTel encompasses the following aspects of Temasek's

Charter; (a) innovation, (b) (customer fulfilment), (c) (Nurture and cultivate …

outstanding employees), (d) (operational excellence) and (e) (build significant

international … businesses). SingTel also encompasses (b) (non-core

businesses) and (e) (acquisitions).119

4.4 Singapore Airlines

Singapore Airlines (SIA) was born in 1972 when Malaysia-Singapore

Airlines (MSA), the evolution of Malayan Airways (established in 1947), split into

two companies; SIA and Malaysia Airlines. SIA launched with 10 aircraft and 34

years later made aviation history with its launch of the first non-stop commercial

flight from Singapore to Los Angeles.120 Kraus notes that 'Singapore Airlines was

118

SingTel, 'Corporate Signature', http://home.singtel.com/about_singtel/company_profile/corporate_signature/companyprof_corporate signature.asp, Accessed 13/03/04 119

Temasek Holdings, 'Temasek announces New Charter: Temasek Charter' 120Singapore Airlines, 'The History of Songapore Airlines',

www.singaporeair.com/saa/app/saa;JSESSIONID_WLCS_PORTAL=AVL525rjgWEi50Sch2gkJ3NebWou7AKeal+6Jj1QZLiKd2rihs7u!1942912194!-140777031!7502?hidHeaderAction=onHeader MenuClick&hidTopicArea=SiaStory&currentSite=global, Accessed 13/03/04

46

partially divested in 1985, but the government remains the largest stockholder

and thus retains control.'121

SIA has used technology innovatively and thus affected its development.

SIA pioneered in-flight services such as free drinks122 and now offers 'Krisworld

with over 60 entertainment options, including everything from blockbuster movies

and TV hits to thrilling interactive games, the widest selection of music, satellite

text news and even your own phone.'123 SIA states that it owes its success to its

customers and by knowing its customers and learning the needs, SIA can offer

products that its customers want (e.g. non-stop commercial flights from

Singapore to New York that are planned to begin in June 2004).124 Technology

transfer came only with the implementation of the ideas above and R&D is

somewhat evident in that SIA researched its market and developed its products

as it grew.

SIAs fulfilment of Temasek's Charter is similar to PSA and SingTel and

encompasses PSA (a) (excellence and innovation), (b) (customer fulfilment), (c)

(Nurture and cultivate … outstanding employees), (d) (operational excellence)

and (e) (build significant international … businesses) and SingTel (b) (non-core

businesses) and (e) (acquisitions).125

121

Krause, Lawrence B., 'Government as Entrepreneur' in Sandhu, Kernial Singh. and Wheatley, Paul. (ed.'s), Management of Success: The Moulding of Modern Singapore (Singapore: Institute of Southeast Asian Studies, 1989) p.449 122

Singapore Airlines, 'The History of Songapore Airlines' 123

Singapore Airlines, 'Excellence Across the Continents: Introduction', www.singaporeair.com/saa/app/saa?hidHeaderAction=onHeaderMenuClick&hidTopicArea-MICE&currentSite=global, Accessed 13/03/04 124

Singapore Airlines, 'The History of Songapore Airlines' 125

Temasek Holdings, 'Temasek announces New Charter: Temasek Charter'

47

Obviously there is a danger if one equates Temasek to the Singapore

Government and the above examples are clearly oversimplifications of the true

nature of the companies. However, all three examples are key parts of the

Singaporean economy and the overview reflects the arguments of the previous

chapters, namely that knowledge and learning, technology transfer and R&D are

paramount to technological development and that Singapore (made unique

through its government's GLC relationships) has an unusual balance between its

public and private sector which works nonetheless.

48

5 : Conclusion

Milne and Mauzy summarise the government and market debate in

Singapore well. They explain that Singapore is closer to a free-market economy

than many other countries as 'there are very few tariffs, no foreign exchange

controls, few restrictions of private enterprise or investment, and no limits on

profit remittances or capital repatriation.' However, they make clear that

'economic freedom of action can be exercised only within certain limits because

the state plays a major role in managing the economy' with the market being

'free' only to the extent that the government allows it to be free. The state

determines 'what is produced, what is available for export, and what is subsidised

… and what is not' which, argues Milne and Mauzy, substantially modifies 'the

picture of a free market.' The picture is modified in part by the role of the

government being 'primarily market facilitating rather than market inhibiting.'

Without government intervention, through the statutory boards for example, 'an

economic infrastructure for development' may not have been created and

maintained.126 Quah and Quah clarified this idea when they said 'government

intervention is necessary, even imperative, when the task is to build a new

nation.'127

Undoubtedly, Singapore was a new nation when the People's Action Party

(PAP) began ruling. The questions that ought to be addressed concern whether

126

Milne and Mauzy, Singapore: The Legacy of Lee Kuan Yew, p.143 127

Quah, John S. T. and Quah, Stella R., 'The Limits of Government Intervention' in Sandhu, Kernial Singh. and Wheatley, Paul. (ed.'s), Management of Success: The Moulding of Modern Singapore (Singapore: Institute of Southeast Asian Studies, 1989) p.116

49

government intervention in the market is necessary today for continued

technological growth, whether one can speak of a Singaporean model for

development that could be transferred to aid technological growth in other

nations and what the future holds for Singapore.

5.1 Is government intervention in Singapore's economy still

necessary for technological growth?

In 1989, Quah and Quah asked 'for how long should the PAP government

nurse and spoon-feed the new Republic?'128 Goh Chok Tong answered this in

2003 when he said 'the Government can create the conditions for the country to

thrive. But the people will have to carve out their future themselves.'129

Government intervention is a characteristic of Singapore's economy and

overall it is successful. Booth makes a valid point when she says 'why tamper'130

but if the past is examined as a development, one can see a heavily intervening

government in the far past, a government that partly-divests in the recent past

and a Prime Minister praising his people for their resourcefulness in the eye of

economic difficulty in the present day. The government still has a key role to play

through structures such as the NWC; however, its best role is its encouragement

of its people through education and the provision of opportunities. The

128

Quah and Quah, 'The Limits of Government Intervention', p.116 129

Prime Minister Goh Chok Tong, 'National Day Rally Speech 2003' 130

Booth, 'Privatisation may not be the best answer', p.159

50

government says that Singapore's people are her most precious commodity131

and as a result this commodity has been nurtured.

Government intervention is likely to continue helping technological growth

as it develops its policy alongside that growth. Possibly one day the government

will withdraw to the degree of some other countries but this will mirror the

economic climate at the time. There is no hurry and Singapore would be best to

continue as she is, evolving her strategy as her markets evolve.

5.2 Can one speak of a Singaporean model for development?

Kausikan states that 'Singapore does not hold itself up as a model for

anyone'132, however it is inevitable that other countries will view it as a model.

Table 1 in Harvie and Lee, replicated below, shows that there was a model of a

kind for East Asia and Singapore fits that model. However, so much of

Singapore's success has been down to luck or cannot be copied due to the

current age. Singapore emerged during a very specific period of world trade,

Singapore was a colony (something unlikely to happen today), Singapore was

not initially aiming for great success, merely survival133 and Singapore has

geographical advantages that are rare; her location and her size. Without a doubt

then, Singapore can not be spoken of a model for development.

131

The Government of Singapore, The Next Lap, p.19 132

Kausikan, 'Governance That Works' 133

'We had only a few battalions of soldiers and two old navy ships. How could we protect our people? Our economy too was threatened.' Goh Chok Tong talking about Singapore in 1971, Goh Chok Tong, 'National Day Rally Speech 2003'

51

The “Old” East Asian Development Model: Key Ingredients

Initial Conditions Backward economies

Sound work ethic and low labour costs High spirit of education and good primary education system

External Environment Trade liberalisation under the GATT Free trade approach by the United States Flying geese pattern pioneered by Japan Global capital flow/international capital markets

Policy Factors Primarily market-based mechanisms of competitive discipline Tailored government intervention Outward orientation Stable macroeconomic management Emphasis on education

Interim Outcome High savings High investment Increasing human capital Rapid growth of exports Rapid catching-up of technology Rapid demographic change

Final Outcome Rapid industrialisation Rapid and sustained economic growth

Reduced poverty Improving Social Indicators134

5.3 What does the future hold for Singapore?

Kon has highlighted the struggle for art funding in Singapore and argues

for government funding not because art for art's sake is enough but because in

134

Harvie, Charles. and Lee, Hyun-Hoon., „New Regionalism in East Asia – How Does It Relate to the East Asian Economic Model? in ASEAN Economic Bulletin (Volume 19, Number 2, August 2002) p.126

52

participating in the arts, people become more open minded as 'in art there isn't

one right answer, but there are many possibilities.'135 As this dissertation has

discussed, Singapore has changed since Kon wrote her article in 1991.

Singapore is no longer perceived within the strict confines of the early 1990s and

instead faces many possibilities.

One of these possibilities may be the innovative milieu with the Malaysian

State of Johor as discussed in Chapter 2.4 and this could one day lead to a

reunification of the two countries, Konstadakopulos points out that „in the last two

decades the Singapore-Johor agglomeration has evolved to become one of the

leading high technology clusters in the ASEAN region‟136 and „The majority of

TNCs based in Singapore have expanded into Malaysia.'137 Malaysia has all of

the land and people Singapore could ever need and Singapore has the

technological capacity that Malaysia wishes to build.

This is not to suggest a reunification is likely (at least in the short term) but

to show that Singapore, the tiny country that has amazed the world for 45 years

is not to be underestimated. Her government, her market, her continued

technological growth – the world can only watch to see which direction she

chooses next.

Word Count: Approximately 12,000 Words including titles and footnotes

135

Stella Kon, The arts and the market in Derek Da Gunha (ed), Debating Singapore (Singapore: Institute of Southeast Asian Studies, 1994) p.p.99-104 136

Konstadakopulos, „Learning Behaviour and Co-operation of Small High Technology Firms in the ASEAN Region – Some Evidence from the Singapore-Johor Agglomeration‟, p.57 137

Ibid, p.50

53

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